CFPB Cracks Down on Subscription Businesses

Companies are being cautioned that they must not trick people into paying for subscriptions they don’t want.

The Consumer Financial Protection Bureau (CFPB) has issued a guidance focused on “negative option” subscription services, which are those that automatically renew unless the consumer cancels, or that start with a lower fee and then automatically shift to a higher one, according to a Thursday (Jan. 19) press release.

When offering these services, companies must disclose the terms and obtain informed consent, and must not make it unreasonably difficult for subscribers to cancel, the release 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 the release. “The CFPB has made it clear that misleading consumers about products or subscription services they don’t want is not only dishonest, but a violation of the law.”

As PYMNTS reported in August 2022, unexpected fees are one of the most common sources of consumers’ subscription-related frustration. Fifty-one percent of people who have subscription-based accounts have run up against unwanted charges at some point, often when a free trial turns into a paid subscription without the customer realizing.

The difficulties consumers face when trying to cancel a subscription are another common frustration. One survey of subscription holders found that 34% said it was difficult to cancel or turn off automatic payments, as reported in the “Subscription Commerce Tracker®,” a PYMNTS and Vindicia collaboration.

In its Jan. 19 press release, the CFPB said that examples of deceptive tactics are digital “dark patterns,” which are tricks built into websites to hide information, to make it difficult to cancel subscriptions or to get consumers to click on links and make purchases inadvertently.

Another example is the practice of requiring customers to call repeatedly or wait an unreasonably long time to cancel a subscription, according to the press release.

“Deceptive practices that seek to trap consumers into subscriptions they don’t want are a violation of the law,” Samuel Levine, director of the Federal Trade Commission (FTC) Bureau of Consumer Protection, said in the release. “Today’s circular puts companies on notice that there is a government-wide effort to stop these manipulations.”