Regulator says many services trick consumers into seemingly endless monthly payments
The Consumer Financial Protection Bureau (CFPB) is taking action to protect consumers from subscription services that are seemingly impossible to cancel. The federal regulator is issuing guidance to companies offering subscription services that specifically outlines the requirement of a clear, explicit cancellation option.
“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,” said CFPB Director Rohit Chopra. “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.”
The Federal Trade Commission (FTC) joined the CFPB in the most recent guidance.
"Deceptive practices that seek to trap consumers into subscriptions they don’t want are a violation of the law," said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. "Today’s circular puts companies on notice that there is a government-wide effort to stop these manipulations."
The CFPB is specifically targeting so-called "negative option" marketing. Negative option marketing refers to a term or condition under which a seller may interpret a person’s silence or failure to cancel an agreement as continued acceptance of the offer. The CFPB has received complaints from consumers about being charged for products or services they did not intend to purchase or had sought to cancel and has brought many enforcement actions involving unlawful negative option marketing practices.
The CFPB warned:
"Companies offering negative option programs risk violating the Consumer Financial Protection Act’s (CFPA) prohibition on unfair, deceptive, or abusive acts or practices."
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