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CFPB: Negative Option Marketing Practices May Violate CFPA – Dodd-Frank, Consumer Protection Act


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On January 19, the CFPB issued Circular 2023-01 to affirm that companies
offering “negative option” subscription services are
required to comply with federal consumer financial protection laws.
According to the Circular, “negative option” refers to a
term or condition under which a seller may interpret a
consumer’s silence, failure to take an affirmative action to
reject a product or service, or failure to cancel an agreement as
acceptance or continued acceptance of the offer (see our previous
blog posts on negative option marketing here and here). The CFPB warns that negative option
marketing practices may violate the prohibition on unfair,
deceptive, or abusive acts or practices in the CFPA where a

  1. Misrepresents or fails to clearly and conspicuously disclose
    the material terms of a negative option program;

  2. Fails to obtain consumers’ informed consent; or

  3. Misleads consumers who want to cancel, erects unreasonable
    barriers to cancellation, or fails to honor cancellation requests
    that comply with its promised cancellation procedures.

The Circular highlights that negative option programs can be
particularly harmful when paired with “dark patterns”
because consumers may be misled into purchasing subscriptions and
other services with recurring charges and be unable to cancel the
unwanted products and services or avoid their charges. The Circular
cites to recent CFPB and FTC enforcement to combat the rise of
digital dark patterns, designed to deceive, steer, or manipulate
users into behavior that is profitable for a company, but often
harmful to users or contrary to their intent (see our recent
webinar on dark patterns enforcement in the retail space here).

The CFPB notes it has received consumer complaints, including
complaints from older consumers, about being repeatedly charged for
services they did not intend to buy or no longer want to continue
purchasing. Some consumers have reported that they were enrolled in
subscriptions without knowledge of the program and its cost.
Consumers have also complained about the difficulty of cancelling
subscription-based services and about charges made to their credit
card or bank account after they requested cancellation.

Putting It Into Practice: In addition the CFPB
and FTC, companies must contend with additional regulation of
negative option marketing from several states, including new
autorenewal laws in California, Colorado, Delaware, and Illinois.
Given some of the more aggressive aspects of federal guidance and
new state laws, it will be important for companies to carefully
monitor federal and state enforcement related to recurring
subscription programs and carefully review any recurring billing or
subscription programs in light of the ongoing focus on this

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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