In response to a rising number of complaints, on October 28th, the Federal Trade Commission issued a new enforcement policy statement warning companies against the use of deceptive website tactics that trick consumers into signing up for recurring payment subscriptions that are difficult if not impossible to cancel.
The policy statement builds on the many enforcement actions taken by the FTC and other law enforcement agencies against companies that employ illegal subscription tricks and traps such as automatic renewal subscriptions, continuity plans, free-to-pay or free-to-pay conversions, and pre-notification plans. In its statement, the FTC notified companies that they will face legal action if their sign-up process fails to provide clear, up-front information, obtain consumers’ informed consent, and make cancellation easy.
Over the past few years, the FTC has brought enforcement actions challenging a variety of illegal subscription practices. It has sued companies that hid important payment information (or even the fact that consumers would be charged at all), behind hyperlinks, hover-overs or buried on pages beyond the initial offer page. It has also acted against companies that made consumers wait on hold or listen to lengthy ads before they could cancel or converted free trials to paid subscriptions before the free trial ended.
The enforcement policy statement sets forth three key requirements business must follow to avoid potential law enforcement action and civil penalties:
1. Clearly and conspicuously disclose all material terms of the product or service, including how much it costs, deadlines by which the consumer must act to stop further charges, the amount and frequency of such charges, how to cancel, and information about the product or service itself that is needed to stop consumers from being deceived about it.
2. Express informed consent is required before charging a consumer for a product or services. This includes obtaining the consumer’s acceptance of the negative option feature separately from other portions of the entire transaction.
3. Provide an easy and simple cancellation process. Cancellation mechanisms should be as easy to use as the method the consumer used to buy the product or service in the first place.
Regarding the statement, Samuel Levine, Director of the FTC’s Bureau of Consumer Protection said “Today’s enforcement policy statement makes clear that tricking consumers into signing up for subscription programs or trapping them when they try to cancel is against the law. Firms that deploy dark patterns and other dirty tricks should take notice.”
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