Blog: CFPB targets deceptive negative option marketing practices … – Financial Regulation News

The Consumer Financial Protection Bureau (CFPB) noted that a newly issued circular affirms companies offering negative option subscription services must comply with federal consumer financial protection law.

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“Consumers shouldn’t have to jump through hoops to cancel subscriptions they don’t want, and they shouldn’t have to worry about a trial marketing offer turning into an unwanted monthly charge,” CFPB Director Rohit Chopra said. “The CFPB has made it clear that misleading consumers about products or subscription services they don’t want is not only dishonest but also a violation of law.”

According to the CFPB, negative option programs include subscription services that automatically renew unless the consumer affirmatively cancels, and trial marketing programs charge a reduced fee for an initial period and then automatically begin charging a higher one.

The CFPB indicated companies risk violating the law if they do not clearly and conspicuously disclose the terms of their subscription services and obtain consumers’ informed consent or if they make it unreasonably difficult for consumers to cancel.

“Deceptive practices that seek to trap consumers into subscriptions they don’t want are a violation of the law,” Federal Trade Commission (FTC) Bureau of Consumer Protection Director Samuel Levine said.

The circular puts companies on notice that there is a government-wide effort to stop the manipulations.

The CFPB has determined companies offering negative option programs risk violating the Consumer Financial Protection Act’s (CFPA) prohibition on unfair, deceptive, or abusive acts or practices where they fail to disclose, clearly and conspicuously, the material terms of the negative option offer to the consumer; fail to obtain the consumer’s informed consent; and mislead or impede consumers wishing to cancel.

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