CFPB Targets Companies’ ‘Negative Option’ Subscription Services

The Consumer Financial Protection Bureau warned that companies face potential enforcement actions if they make it difficult for customers to cancel subscription services.

Credit card, credit reporting, and credit repair firms, among others, frequently deploy so-called “negative option” trial periods, where consumers try out a subscription service for a short period of time for free, or at a discount, but get bumped up to pricier full subscriptions unless they cancel first.

“Negative option” refers to any term or condition of sale where a consumer’s silence, or failure to take an affirmative action to reject or cancel a good or service, is taken as acceptance.

The CFPB said, in a Thursday circular, that companies have to clearly inform consumers about the terms of their trial subscriptions and that customers they will be charged full freight unless they cancel. Companies are also required to make it easy for customers to cancel subscriptions without being pressured to keep a service, the CFPB said.

Failing to meet those three requirements could be a violation of the CFPB’s ban on unfair, deceptive and abusive acts and practices (UDAAP) and other consumer financial protection laws and result in potential fines and other penalties, the CFPB said.

“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 in a statement.

The CFPB has already taken action against companies that it says used misleading tactics to keep customers locked into subscription services they don’t want.

The most recent case is the CFPB’s April 2022 lawsuit against TransUnion LLC for allegedly using deceptive marketing practices and digital “dark patterns”—design tactics aimed at pushing consumers into purchasing items and services they don’t necessarily want—to sell credit scores, reports, and monitoring products.

The CFPB has also reached settlements with several credit card issuers for employing tactics to get customers to sign up for optional “add-on” products that came with recurring fees.

The Federal Trade Commission in October 2021 issued its own policy statement warning companies about the use of “negative option” subscription services to lure consumers into signing up for products. The CFPB said its circular largely follows the FTC’s warnings, which cover a wider range of companies beyond consumer finance firms.

“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,” Samuel Levine, the director of the FTC’s Bureau of Consumer Protection, said in a Thursday statement.