Consumer Financial Protection Circular 2023-01: Unlawful Negative Option Marketing Practices, 5727-5730 [2023-01560]
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Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Rules and Regulations
information in the database is current,
accurate, and complete. The UEI of the
applicant must be included in the
application.
(c) * * *
(12) Unqualified, audited financial
statements from the date the application
is submitted as detailed in § 1740.63;
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(19) If service is being proposed on or
over Tribal Land, a Tribal Government
Resolution of Consent from the Tribal
Council of the Tribal Government with
jurisdiction over the Tribal Lands at
issue must be provided to show that
they are in support of the project and
will allow construction to take place on
Tribal Land. * * *
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■ 6. Amend § 1740.63 by:
■ a. Redesignating paragraphs (a)(2)
through (5) as paragraphs (a)(3) through
((6).
■ b. Redesignating paragraph (a)(1) as
paragraph (a)(2);
■ c. Adding a new paragraph (a)(1); and
■ d. Revising the first sentence of newly
redesignated paragraph (a)(2).
The addition and revision read as
follows:
§ 1740.63
(a) * * *
(1) Applicants subject to 2 CFR part
200 must submit an audited financial
statement for the previous year from the
date the application is submitted. If an
application is submitted and the most
recent year-end audit has not been
completed, the applicant can use the
previous audit that has been completed.
(2) Applicants not subject to 2 CFR
part 200 must submit unqualified,
comparative, audited financial
statements for the previous year from
the date the application is submitted.
* * *
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Subpart F—Closing, Servicing, and
Reporting
7. Amend § 1740.80 by:
c. Redesignating paragraphs (c)
through (g) as paragraphs (d) through
(h);
■ b. Redesignating paragraph (b) as
paragraph (c);
■ a. Adding a new paragraph (b); and
■ d. Revising the first sentence of newly
redesignated paragraph (c).
The addition and revision read as
follows:
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§ 1740.80 Accounting, monitoring, and
reporting requirements.
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(b) Awardees subject to 2 CFR part
200 must submit annual audited
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Andrew Berke,
Administrator, Rural Utilities Service, Rural
Development.
[FR Doc. 2023–01621 Filed 1–27–23; 8:45 am]
BILLING CODE 3410–15–P
BUREAU OF CONSUMER FINANCIAL
PROTECTION
12 CFR Chapter X
Consumer Financial Protection
Circular 2023–01: Unlawful Negative
Option Marketing Practices
Bureau of Consumer Financial
Protection.
ACTION: Consumer financial protection
circular.
AGENCY:
Financial information.
■
■
financial statements along with a report
on compliance and on internal control
over financial reporting, in accordance
with 2 CFR part 200, subpart F.
(c) Awardees not subject to 2 CFR part
200 must submit annual comparable
audited financial statements along with
a report on compliance and on internal
control over financial reporting in
accordance with the requirements of 7
CFR part 1773 using the RUS’ online
reporting system.
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The Consumer Financial
Protection Bureau (Bureau or CFPB) has
issued Consumer Financial Protection
Circular 2023–01, titled ‘‘Unlawful
Negative Option Marketing Practices.’’
In this circular, the Bureau responds to
the question, ‘‘Can persons that engage
in negative option marketing practices
violate the prohibition on unfair,
deceptive, or abusive acts or practices in
the Consumer Financial Protection Act
(CFPA)? ’’
DATES: The Bureau released this circular
on its website on January 19, 2023.
ADDRESSES: Enforcers, and the broader
public, can provide feedback and
comments to Circulars@cfpb.gov.
FOR FURTHER INFORMATION CONTACT:
Colin Reardon, Senior Counsel, Office of
Law & Policy, at (202) 570–6740. If you
require this document in an alternative
electronic format, please contact CFPB_
Accessibility@cfpb.gov.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Question Presented
Can persons that engage in negative
option marketing practices violate the
prohibition on unfair, deceptive, or
abusive acts or practices in the
Consumer Financial Protection Act
(CFPA)?
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Response
Yes. ‘‘Covered persons’’ and ‘‘service
providers’’ must comply with the
prohibition on unfair, deceptive, or
abusive acts or practices in the CFPA.1
Negative option marketing practices
may violate that prohibition where a
seller (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.
Background on Negative Option
Marketing
As used in this Circular, the phrase
‘‘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.
Negative option programs are
common across the market, including in
the market for consumer financial
products and services, and such
programs can take a variety of forms.
For example, in automatic renewal
plans, consumers’ subscriptions are
automatically renewed when they
expire unless consumers affirmatively
cancel their subscriptions by a certain
date. In continuity plans, consumers
agree in advance to receive a product or
service, which they continue to receive
until they cancel the agreements. In trial
marketing plans, consumers receive
products or services for free (or for a
reduced fee) for a trial period. After the
trial period, consumers are
automatically charged a fee (or a higher
fee) on a recurring basis unless they
affirmatively cancel.
Negative option programs can cause
serious harm to consumers who do not
wish to receive the products or services
for which they are charged. Harm is
most likely to occur when sellers
mislead consumers about terms and
conditions, fail to obtain consumers’
informed consent, or make it difficult
for consumers to cancel. The Consumer
Financial Protection Bureau (CFPB) has
received consumer complaints,
including complaints from older
1 12 U.S.C. 5481(6), (26), 5531, 5536. For
simplicity, the remainder of this Circular refers to
covered persons and service providers as ‘‘sellers.’’
The CFPB notes, however, that entities and
individuals can be covered persons or service
providers (and thus subject to liability under the
CFPA) even if they do not themselves engage in
‘‘selling’’ a consumer financial product or service
with a negative option feature.
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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.2 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.3
In recent decades, the Federal Trade
Commission (FTC) has brought
numerous enforcement cases
challenging harmful negative option
practices using its authority under
section 5 of the FTC Act, which
prohibits unfair or deceptive acts or
practices.4 The FTC’s enforcement cases
have also frequently relied on the
Restore Online Shoppers’ Confidence
Act (ROSCA) 5 and the Telemarketing
Sales Rule (TSR).6 The FTC recently
summarized its enforcement work
regarding negative option marketing in
a policy statement, which noted that its
cases have ‘‘involve[d] a range of
deceptive and unfair practices,
including inadequate disclosures of
hidden charges in ostensibly ‘free’ offers
and other products or services,
enrollment without consumer consent,
and inadequate or overly burdensome
cancellation and refund procedures.’’ 7
Since it began enforcement in 2011,
the CFPB has brought enforcement
actions to halt a variety of harmful
negative option practices, which have
primarily relied on the CFPA’s
2 See Consumer Response Annual Report at 25
(CFPB Mar. 2018), https://
files.consumerfinance.gov/f/documents/cfpb_
consumer-response-annual-report_2017.pdf;
Monthly Complaint Report at 16 (CFPB May 2017),
https://files.consumerfinance.gov/f/documents/
201705_cfpb_Monthly_Complaint_Report.pdf.
3 See Consumer Response Annual Report at 67
(CFPB Mar. 2022), https://
files.consumerfinance.gov/f/documents/cfpb_2021consumer-response-annual-report_2022-03.pdf;
Consumer Response Annual Report at 88 (CFPB
Mar. 2021), https://files.consumerfinance.gov/f/
documents/cfpb_2020-consumer-response-annualreport_03-2021.pdf.
4 See, e.g., FTC v. Vonage Holdings Corp., No.
3:22–cv–6435 (D.N.J. 2022); FTC v. Age of Learning,
Inc., No. 2:20–cv–07996 (C.D. Cal. 2020); FTC v.
Apex Capital Group, LLC, No. 2:18–cv–09573 (C.D.
Cal. 2018); FTC v. Triangle Media Corp., No. 3:18–
cv–01388 (S.D. Cal. 2018); FTC v. AdoreMe, Inc.,
No. 1:17–cv–09083 (S.D.N.Y. 2017); FTC v.
RevMountain, LLC, No. 2:17–cv–02000 (D. Nev.
2017); FTC v. Health Formulas, LLC, No. 2:14–cv–
01649 (D. Nev. 2016); FTC v. JDI Dating, Ltd., No.
1:14–cv–08400 (N.D. Ill. 2014); FTC v. Complete
Weightloss Center, No. 1:08–cv–00053 (D.N.D.
2008); FTC v. Consumerinfo.com, No. 05–cv–801
(C.D. Cal. 2005); see also 15 U.S.C. 45.
5 15 U.S.C. 8401 et seq.
6 16 CFR part 310.
7 Enforcement Policy Statement Regarding
Negative Option Marketing, 86 FR 60822, 60823
(Nov. 4, 2021) (hereafter, FTC Policy Statement).
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prohibition on unfair, deceptive, and
abusive acts or practices.8 For example,
the CFPB has brought multiple
enforcement actions involving optional
‘‘add-on’’ products offered to credit card
users, such as debt protection and
identity protection products, which
featured recurring fees that continued
until consumers affirmatively
cancelled.9 In other enforcement actions
involving negative option practices, the
CFPB has found or alleged that
consumer reporting companies,10 debt
relief companies,11 credit repair
companies,12 payment processors,13 and
service providers 14 have engaged in
unfair, deceptive, and abusive acts or
practices.
The CFPB has also relied on other
Federal consumer financial laws that it
enforces to address certain harmful
negative option marketing practices.
The Electronic Fund Transfer Act
(EFTA) and Regulation E prohibit
preauthorized electronic fund transfers
from a consumer’s bank account
without written authorization.15 The
TSR also prohibits deceptive acts or
practices by telemarketers, including
failing to disclose the material terms of
a negative option feature of an offer and
8 12
U.S.C. 5531, 5536.
CFPB v. Sterling Jewelers, Inc., No. 1:19–cv–
00448 (S.D.N.Y. 2019); First National Bank of
Omaha, File No. 2016–CFPB–0014 (Aug. 25, 2016)
(consent order); Citibank, N.A., File No. 2015–
CFPB–0015 (July 21, 2015) (consent order);
Synchrony Bank, f/k/a GE Capital Retail Bank, No.
2014–CFPB–0007 (June 19, 2014) (consent order);
Bank of America, N.A., File No. 2014–CFPB–0004
(Apr. 9, 2014) (consent order); American Express
Centurion Bank, File No. 2013–CFPB–0011 (Dec.
24, 2013) (consent order); Discover Bank, File No.
2012–CFPB–0005 (Sept. 24, 2012) (joint consent
order with FDIC); Capital One Bank, (USA) N.A.,
2012–CFPB–0001 (July 18, 2012) (consent order).
For a description of consumer protections
applicable to credit card add-on products and the
CFPB’s compliance expectations regarding such
products, see Marketing of Credit Card Add-on
Products, CFPB Bulletin 2012–06 (July 18, 2012).
10 CFPB v. Transunion, No. 1:22–cv–01880 (N.D.
Ill. 2022); Equifax Inc., File No. 2017–CFPB–0001
(Jan. 3, 2017) (consent order); Transunion
Interactive, Inc., File No. 2017–CFPB–0002 (Jan. 3,
2017) (consent order).
11 CFPB v. Student Financial Aid Services, Inc.,
No. 2:15–cv–00821 (E.D. Cal. 2015).
12 CFPB v. Prime Marketing Holdings, LLC, No.
2:16–cv–07111 (C.D. Cal. 2016).
13 CFPB v. ACTIVE Network, LLC, No. 4:22–cv–
00898 (E.D. Tex. 2022).
14 CFPB v. Affinion Group Holdings, Inc., No.
5:15–cv–01005 (D. Conn. 2015); CFPB v.
Intersections Inc., No. 1:15–cv–835 (E.D. Va. 2015).
15 See 15 U.S.C. 1693e(a); 12 CFR 1005.10(b); see
also CFPB v. Student Financial Aid Services, Inc.,
No. 2:15–cv–00821 (E.D. Cal. 2015). The CFPB
described these requirements in more detail in a
2015 compliance bulletin. See Requirements for
Consumer Authorization for Preauthorized
Electronic Fund Transfers, CFPB Compliance
Bulletin 2015–06 (Nov. 23, 2015).
9 See
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misrepresenting the total cost to
purchase goods or services.16
Recently, the CFPB and FTC have
taken action to combat the rise of digital
dark patterns, which are design features
used to deceive, steer, or manipulate
users into behavior that is profitable for
a company, but often harmful to users
or contrary to their intent.17 Dark
patterns can be particularly harmful
when paired with negative option
programs, causing consumers to be
misled into purchasing subscriptions
and other services with recurring
charges and making it difficult for
consumers to cancel and avoid such
charges.18
Analysis
The CFPB is issuing this Circular to
emphasize that covered persons and
service providers who engage in
negative option marketing are required
to comply with the CFPA’s prohibition
on unfair, deceptive, and abusive acts or
practices.19 The CFPB further
emphasizes that its approach to negative
option marketing is generally in
alignment with the FTC’s approach to
section 5 of the FTC Act as set forth in
its recent policy statement. In particular,
the CFPB shares the view that a seller
offering a negative option program risks
violating the law if the seller (1) does
not clearly and conspicuously disclose
the material terms of the negative option
offer to the consumer, (2) does not
obtain the consumer’s informed
consent, or (3) misleads consumers who
wish to cancel, erects unreasonable
barriers to cancellation, or impedes the
effective operation of promised
cancellation procedures.20
Disclosure. Sellers may violate the
CFPA’s prohibition on deceptive acts or
practices if they misrepresent or fail to
clearly and conspicuously disclose the
material terms of an offer for a product
or service with a negative option
feature. Under the CFPA, a
16 16 CFR 310.3(a)(1)(vii), (a)(2)(i); see also CFPB
v. Prime Marketing Holdings, LLC, No. 2:16–cv–
07111 (C.D. Cal. 2016); Citibank, N.A., File No.
2015–CFPB–0015 (July 21, 2015) (consent order);
CFPB v. Student Financial Aid Services, Inc., No.
2:15–cv–00821 (E.D. Cal. 2015).
17 See, e.g., FTC v. Age of Learning, Inc., No.
2:20–cv–07996 (C.D. Cal. 2020); Statement of CFPB
Director Rohit Chopra on Complaint Against
ACTIVE Network (Oct. 18, 2022), https://
www.consumerfinance.gov/about-us/newsroom/
statement-of-cfpb-director-rohit-chopra-oncomplaint-against-active-network/.
18 See Bringing Dark Patterns to Light at 11–15
(FTC Sept. 2022), https://www.ftc.gov/system/files/
ftc_gov/pdf/P214800%20Dark%20Patterns
%20Report%209.14.2022%20-%20FINAL.pdf.
19 Sellers should also comply with other
consumer protection laws enforceable by the CFPB
that may apply to their conduct, such as EFTA,
Regulation E, and the TSR.
20 See FTC Policy Statement, 86 FR 60823–25.
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representation or omission is deceptive
if it is likely to mislead a reasonable
consumer and is material.21 A
‘‘material’’ representation or omission
‘‘involves information that is important
to consumers and, hence, likely to affect
their choice of, or conduct regarding, a
product.’’ 22 Where a seller makes a
partial disclosure about the nature of a
product or service, its failure to disclose
other material information may be
deceptive.23 In assessing the meaning of
a representation or omission, the CFPB
looks to the overall, net impression of
the communication, meaning that it
considers the context of the entire
advertisement, transaction, or course of
dealing rather than evaluating
statements in isolation.24
The material terms of a negative
option offer would typically include the
following, to the extent applicable:
• That the consumer is enrolling in
and will be charged for the product or
service.
• The amount (or range of amounts)
that the consumer will be charged.
• That charges will be on a recurring
basis unless the consumer takes
affirmative steps to cancel the product
or service.
• That, in a trial marketing plan,
charges will begin (or increase) after the
trial period unless the consumer takes
affirmative action.25
A seller would likely violate the
CFPA by misrepresenting or failing to
adequately disclose these material
terms, as the CFPB’s enforcement cases
illustrate. For example, the CFPB found
that consumer reporting agencies
deceptively represented that creditrelated products were ‘‘free’’ when, in
reality, consumers who signed up for a
‘‘free’’ trial were automatically enrolled
in a subscription program with a
recurring monthly fee unless they
cancelled.26 In those cases, disclosures
21 See CFPB v. Gordon, 819 F.3d 1179, 1192–93
(9th Cir. 2016).
22 Novartis Corp. v. FTC, 223 F.3d 783, 786 (D.C.
Cir. 2000) (quoting In re Cliffdale Assocs., Inc., 103
F.T.C. 110, 165 (1984)).
23 See, e.g., Sterling Drug Inc. v. FTC, 741 F.2d
1146, 1154 (9th Cir. 1984) (drug company’s failure
to disclose that its drug only contained ordinary
aspirin was misleading when its advertisements
implied that the drug did not contain aspirin); see
also FTC v. Bay Area Business Council, Inc., 423
F.3d 627, 635 (7th Cir. 2005) (‘‘[T]the omission of
a material fact, without an affirmative
misrepresentation, may give rise to an FTC Act
violation.’’).
24 See, e.g., CFPB v. Aria, 54 F.4th 1168, 1173 (9th
Cir. 2022); Gordon, 819 F.3d at 1193; see also FTC
v. E.M.A. Nationwide, Inc., 767 F.3d 611, 631 (6th
Cir. 2014); Fanning v. FTC, 821 F.3d 164, 170 (1st
Cir. 2016).
25 This list is not exhaustive, and additional terms
of a negative option offer may be material
depending on the facts and circumstances.
26 Equifax Inc., File No. 2017–CFPB–0001 (Jan. 3,
2017) (consent order); Transunion Interactive, Inc.,
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about the negative option feature were
often displayed in fine print, in low
contrast, and were generally placed in a
less prominent location, such as the
bottom of a web page, grouped with
other disclosures. Thus, the disclosures
were neither clear nor conspicuous.
Similarly, in several credit card add-on
cases, the CFPB found that credit card
issuers engaged in deceptive marketing
and enrollment practices where they did
not adequately inform consumers that
they were purchasing add-on products
or misrepresented the cost of the add-on
products.27
Consent. Sellers engaged in negative
option marketing would likely violate
the CFPA where they fail to obtain the
consumer’s informed consent before
charging the consumer.28 Consent will
generally not be informed if, for
example, a seller mischaracterizes or
conceals the negative option feature,
provides contradictory or misleading
information, or otherwise interferes
with the consumer’s understanding of
the agreement. The CFPB has brought
deception and unfairness claims under
the CFPA where sellers failed to obtain
consumers’ informed consent.29
With respect to deception, as noted, a
representation is deceptive if it is likely
to mislead a reasonable consumer and is
material.30 In the credit card add-on
cases, the CFPB found that credit card
issuers engaged in a deceptive practice
when the card issuers falsely
represented to consumers that they were
agreeing to receive information about an
add-on product rather than purchasing
the product.31
With respect to unfairness, an act or
practice is unfair if it causes or is likely
File No. 2017–CFPB–0002 (Jan. 3, 2017) (consent
order).
27 See, e.g., First National Bank of Omaha, File
No. 2016–CFPB–0014 (Aug. 25, 2016) (consent
order); Synchrony Bank, f/k/a GE Capital Retail
Bank, No. 2014–CFPB–0007 (June 19, 2014)
(consent order); Bank of America, N.A., File No.
2014–CFPB–0004 (Apr. 9, 2014) (consent order).
28 Cf. FTC v. Kennedy, 574 F. Supp. 2d 714, 721
(S.D. Tex. 2008) (defendant engaged in unfair
practice in violation of section 5 of the FTC Act by
imposing charges on consumers’ telephone bills
without obtaining their informed consent).
29 A seller offering a negative option program
must also comply with 12 U.S.C. 5531(d), which
provides that an act or practice is abusive if it (1)
materially interferes with a consumer’s ability to
understand a term or condition of a consumer
financial product or service or (2) takes
unreasonable advantage of the consumer’s (a) lack
of understanding of the material risks, costs, or
conditions of the product or service; (b) inability to
protect their interests in selecting or using a
consumer financial product or service; or (b)
reasonable reliance on a covered person to act in
the consumer’s interests.
30 See Gordon, 819 F.3d at 1192–93.
31 Fifth Third Bank, File No. 2015–CFPB–0025
(Sept. 28, 2015) (consent order); Bank of America,
N.A., File No. 2014–CFPB–0004 (Apr. 9, 2014)
(consent order).
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to cause substantial injury to consumers
which is not reasonably avoidable by
consumers and the injury is not
outweighed by countervailing benefits
to consumers or to competition.32
Applying that standard, the CFPB
alleged that a debt relief company
engaged in an unfair practice by
charging consumers on an automatic,
recurring basis where the recurring
charges were not clearly explained or
disclosed to consumers at the time of
purchase.33
Cancellation. It is understandable that
sellers will generally prefer to retain
their existing customers, but they must
do so in a manner that complies with
the CFPA. For purposes of the
prohibition on deception, certain types
of representations are presumed to be
material, including express
representations and representations
regarding costs.34 Consistent with that
principle, the CFPB found that a credit
card issuer engaged in a deceptive
practice when it represented that
consumers could cancel an add-on
product ‘‘immediately’’ and with ‘‘no
questions asked’’ but then directed sales
representatives to repeatedly rebut
requests to cancel, with the result that
consumers were often unable to cancel
unless they demanded cancellation
multiple times in succession.35 The
CFPB has also found that sellers
engaged in deceptive practices by
making misrepresentations about the
costs and benefits of their products and
services in order to persuade consumers
not to cancel.36
In addition, the CFPB agrees with the
FTC that sellers would likely violate the
law if they erect unreasonable barriers
to cancellation or fail to honor
cancellation requests that comply with
their promised cancellation procedures.
Such conduct would include, for
example, ‘‘[h]ang[ing] up on consumers
who call to cancel; plac[ing] them on
hold for an unreasonably long time;
provid[ing] false information about how
to cancel; or misrepresent[ing] the
32 12
U.S.C. 5531(c).
v. Student Financial Aid Services, Inc.,
No. 2:15–cv–00821 (E.D. Cal. 2015). Specifically,
the CFPB alleged that the company’s practice
caused injuries by subjecting consumers to charges
they did not authorize or bargain for, those injuries
were not reasonably avoidable because the fact of
the recurring charges and negative option feature
were not clearly explained or disclosed to
consumers, and the injury was not outweighed by
any countervailing benefits to consumers or
competition.
34 See Novartis Corp., 223 F.3d at 786.
35 First National Bank of Omaha, File No. 2016–
CFPB–0014 (Aug. 25, 2016) (consent order).
36 Citibank, N.A., File No. 2015–CFPB–0015 (July
21, 2015) (consent order); Capital One Bank, (USA)
N.A., 2012–CFPB–0001 (July 18, 2012) (consent
order).
33 CFPB
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reasons for delays in processing
consumers’ cancellation requests.’’ 37
Depending on the facts and
circumstances, such conduct may
constitute an unfair, deceptive, or
abusive act or practice in violation of
the CFPA.
About Consumer Financial Protection
Circulars
Consumer Financial Protection
Circulars are issued to all parties with
authority to enforce Federal consumer
financial law. The CFPB is the principal
Federal regulator responsible for
administering Federal consumer
financial law, see 12 U.S.C. 5511,
including the Consumer Financial
Protection Act’s prohibition on unfair,
deceptive, and abusive acts or practices,
12 U.S.C. 5536(a)(1)(B), and 18 other
‘‘enumerated consumer laws,’’ 12 U.S.C.
5481(12). However, these laws are also
enforced by State attorneys general and
State regulators, 12 U.S.C. 5552, and
prudential regulators including the
Federal Deposit Insurance Corporation,
the Office of the Comptroller of the
Currency, the Board of Governors of the
Federal Reserve System, and the
National Credit Union Administration.
See, e.g., 12 U.S.C. 5516(d), 5581(c)(2)
(exclusive enforcement authority for
banks and credit unions with $10
billion or less in assets). Some Federal
consumer financial laws are also
enforceable by other Federal agencies,
including the Department of Justice and
the Federal Trade Commission, the
Farm Credit Administration, the
Department of Transportation, and the
Department of Agriculture. In addition,
some of these laws provide for private
enforcement.
Consumer Financial Protection
Circulars are intended to promote
consistency in approach across the
various enforcement agencies and
parties, pursuant to the CFPB’s statutory
objective to ensure Federal consumer
financial law is enforced consistently.
12 U.S.C. 5511(b)(4).
Consumer Financial Protection
Circulars are also intended to provide
transparency to partner agencies
regarding the CFPB’s intended approach
when cooperating in enforcement
actions. See, e.g., 12 U.S.C. 5552(b)
(consultation with CFPB by State
attorneys general and regulators); 12
U.S.C. 5562(a) (joint investigatory work
between CFPB and other agencies).
Consumer Financial Protection
Circulars are general statements of
policy under the Administrative
Procedure Act. 5 U.S.C. 553(b). They
provide background information about
37 FTC
Policy Statement, 86 FR 60823, 60826.
VerDate Sep<11>2014
16:22 Jan 27, 2023
Jkt 259001
applicable law, articulate considerations
relevant to the Bureau’s exercise of its
authorities, and, in the interest of
maintaining consistency, advise other
parties with authority to enforce Federal
consumer financial law. They do not
restrict the Bureau’s exercise of its
authorities, impose any legal
requirements on external parties, or
create or confer any rights on external
parties that could be enforceable in any
administrative or civil proceeding. The
CFPB Director is instructing CFPB staff
as described herein, and the CFPB will
then make final decisions on individual
matters based on an assessment of the
factual record, applicable law, and
factors relevant to prosecutorial
discretion.
Rohit Chopra,
Director, Consumer Financial Protection
Bureau.
[FR Doc. 2023–01560 Filed 1–27–23; 8:45 am]
BILLING CODE 4810–AM–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 71
RIN 2120–AA66
Amendment of Alaskan Federal Airway
V–531 Near Point Hope, AK
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule.
AGENCY:
This action amends Alaskan
Very High Frequency (VHF)
Omnidirectional Range (VOR) Federal
airway V–531 (hereinafter referred to as
Alaskan V–531) due to the planned
decommissioning of the Point Hope, AK
(PHO), Non-Directional Beacon (NDB)
navigational aid (NAVAID).
DATES: Effective date 0901 UTC, April
20, 2023. The Director of the Federal
Register approves this incorporation by
reference action under 1 CFR part 51,
subject to the annual revision of FAA
Order JO 7400.11 and publication of
conforming amendments.
ADDRESSES: FAA Order JO 7400.11G,
Airspace Designations and Reporting
Points, and subsequent amendments can
be viewed online at www.faa.gov/air_
traffic/publications/. For further
information, you can contact the Rules
and Regulations Group, Federal
Aviation Administration, 800
Independence Avenue SW, Washington,
DC 20591; telephone: (202) 267–8783.
SUMMARY:
Frm 00010
Fmt 4700
Colby Abbott, Rules and Regulations
Group, Office of Policy, Federal
Aviation Administration, 800
Independence Avenue SW, Washington,
DC 20591; telephone: (202) 267–8783.
SUPPLEMENTARY INFORMATION:
Authority for This Rulemaking
The FAA’s authority to issue rules
regarding aviation safety is found in
Title 49 of the United States Code.
Subtitle I, Section 106 describes the
authority of the FAA Administrator.
Subtitle VII, Aviation Programs,
describes in more detail the scope of the
agency’s authority. This rulemaking is
promulgated under the authority
described in Subtitle VII, Part A,
Subpart I, Section 40103. Under that
section, the FAA is charged with
prescribing regulations to assign the use
of the airspace necessary to ensure the
safety of aircraft and the efficient use of
airspace. This regulation is within the
scope of that authority as it modifies the
route structure as necessary to preserve
the safe and efficient flow of air traffic
within the National Airspace System.
History
[Docket No. FAA–2022–0540; Airspace
Docket No. 22–AAL–49]
PO 00000
FOR FURTHER INFORMATION CONTACT:
Sfmt 4700
The FAA published a notice of
proposed rulemaking (NPRM) for
Docket No. FAA–2022–0540 in the
Federal Register (87 FR 32378; May 31,
2022), amending Alaskan V–531 due to
the planned decommissioning of the
Point Hope, AK, NDB NAVAID.
Interested parties were invited to
participate in this rulemaking effort by
submitting written comments on the
proposal. No comments were received.
Alaskan VOR Federal airways are
published in paragraph 6010(b) of FAA
Order JO 7400.11G, dated August 19,
2022, and effective September 15, 2022,
which is incorporated by reference in 14
CFR 71.1. The Alaskan VOR Federal
airway action listed in this document
will be published subsequently in FAA
Order JO 7400.11.
Differences From the NPRM
The NPRM proposed amending
Alaskan V–531 to read: ‘‘From
Fairbanks, AK, via Tanana, AK; Huslia,
AK; Selawik, AK; to Kotzebue, AK’’. Use
of the word ‘‘via’’ to describe the change
was in error. To conform to the FAA’s
preferred language, the final rule
removes the ‘‘via’’ from the regulatory
text. The route remains the same as
proposed; the final rule does not
incorporate any substantive changes to
the airway.
E:\FR\FM\30JAR1.SGM
30JAR1
Agencies
[Federal Register Volume 88, Number 19 (Monday, January 30, 2023)]
[Rules and Regulations]
[Pages 5727-5730]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-01560]
=======================================================================
-----------------------------------------------------------------------
BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Chapter X
Consumer Financial Protection Circular 2023-01: Unlawful Negative
Option Marketing Practices
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Consumer financial protection circular.
-----------------------------------------------------------------------
SUMMARY: The Consumer Financial Protection Bureau (Bureau or CFPB) has
issued Consumer Financial Protection Circular 2023-01, titled
``Unlawful Negative Option Marketing Practices.'' In this circular, the
Bureau responds to the question, ``Can persons that engage in negative
option marketing practices violate the prohibition on unfair,
deceptive, or abusive acts or practices in the Consumer Financial
Protection Act (CFPA)? ''
DATES: The Bureau released this circular on its website on January 19,
2023.
ADDRESSES: Enforcers, and the broader public, can provide feedback and
comments to [email protected].
FOR FURTHER INFORMATION CONTACT: Colin Reardon, Senior Counsel, Office
of Law & Policy, at (202) 570-6740. If you require this document in an
alternative electronic format, please contact
[email protected].
SUPPLEMENTARY INFORMATION:
Question Presented
Can persons that engage in negative option marketing practices
violate the prohibition on unfair, deceptive, or abusive acts or
practices in the Consumer Financial Protection Act (CFPA)?
Response
Yes. ``Covered persons'' and ``service providers'' must comply with
the prohibition on unfair, deceptive, or abusive acts or practices in
the CFPA.\1\ Negative option marketing practices may violate that
prohibition where a seller (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.
---------------------------------------------------------------------------
\1\ 12 U.S.C. 5481(6), (26), 5531, 5536. For simplicity, the
remainder of this Circular refers to covered persons and service
providers as ``sellers.'' The CFPB notes, however, that entities and
individuals can be covered persons or service providers (and thus
subject to liability under the CFPA) even if they do not themselves
engage in ``selling'' a consumer financial product or service with a
negative option feature.
---------------------------------------------------------------------------
Background on Negative Option Marketing
As used in this Circular, the phrase ``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.
Negative option programs are common across the market, including in
the market for consumer financial products and services, and such
programs can take a variety of forms. For example, in automatic renewal
plans, consumers' subscriptions are automatically renewed when they
expire unless consumers affirmatively cancel their subscriptions by a
certain date. In continuity plans, consumers agree in advance to
receive a product or service, which they continue to receive until they
cancel the agreements. In trial marketing plans, consumers receive
products or services for free (or for a reduced fee) for a trial
period. After the trial period, consumers are automatically charged a
fee (or a higher fee) on a recurring basis unless they affirmatively
cancel.
Negative option programs can cause serious harm to consumers who do
not wish to receive the products or services for which they are
charged. Harm is most likely to occur when sellers mislead consumers
about terms and conditions, fail to obtain consumers' informed consent,
or make it difficult for consumers to cancel. The Consumer Financial
Protection Bureau (CFPB) has received consumer complaints, including
complaints from older
[[Page 5728]]
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.\2\ 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.\3\
---------------------------------------------------------------------------
\2\ See Consumer Response Annual Report at 25 (CFPB Mar. 2018),
https://files.consumerfinance.gov/f/documents/cfpb_consumer-response-annual-report_2017.pdf; Monthly Complaint Report at 16
(CFPB May 2017), https://files.consumerfinance.gov/f/documents/201705_cfpb_Monthly_Complaint_Report.pdf.
\3\ See Consumer Response Annual Report at 67 (CFPB Mar. 2022),
https://files.consumerfinance.gov/f/documents/cfpb_2021-consumer-response-annual-report_2022-03.pdf; Consumer Response Annual Report
at 88 (CFPB Mar. 2021), https://files.consumerfinance.gov/f/documents/cfpb_2020-consumer-response-annual-report_03-2021.pdf.
---------------------------------------------------------------------------
In recent decades, the Federal Trade Commission (FTC) has brought
numerous enforcement cases challenging harmful negative option
practices using its authority under section 5 of the FTC Act, which
prohibits unfair or deceptive acts or practices.\4\ The FTC's
enforcement cases have also frequently relied on the Restore Online
Shoppers' Confidence Act (ROSCA) \5\ and the Telemarketing Sales Rule
(TSR).\6\ The FTC recently summarized its enforcement work regarding
negative option marketing in a policy statement, which noted that its
cases have ``involve[d] a range of deceptive and unfair practices,
including inadequate disclosures of hidden charges in ostensibly `free'
offers and other products or services, enrollment without consumer
consent, and inadequate or overly burdensome cancellation and refund
procedures.'' \7\
---------------------------------------------------------------------------
\4\ See, e.g., FTC v. Vonage Holdings Corp., No. 3:22-cv-6435
(D.N.J. 2022); FTC v. Age of Learning, Inc., No. 2:20-cv-07996 (C.D.
Cal. 2020); FTC v. Apex Capital Group, LLC, No. 2:18-cv-09573 (C.D.
Cal. 2018); FTC v. Triangle Media Corp., No. 3:18-cv-01388 (S.D.
Cal. 2018); FTC v. AdoreMe, Inc., No. 1:17-cv-09083 (S.D.N.Y. 2017);
FTC v. RevMountain, LLC, No. 2:17-cv-02000 (D. Nev. 2017); FTC v.
Health Formulas, LLC, No. 2:14-cv-01649 (D. Nev. 2016); FTC v. JDI
Dating, Ltd., No. 1:14-cv-08400 (N.D. Ill. 2014); FTC v. Complete
Weightloss Center, No. 1:08-cv-00053 (D.N.D. 2008); FTC v.
Consumerinfo.com, No. 05-cv-801 (C.D. Cal. 2005); see also 15 U.S.C.
45.
\5\ 15 U.S.C. 8401 et seq.
\6\ 16 CFR part 310.
\7\ Enforcement Policy Statement Regarding Negative Option
Marketing, 86 FR 60822, 60823 (Nov. 4, 2021) (hereafter, FTC Policy
Statement).
---------------------------------------------------------------------------
Since it began enforcement in 2011, the CFPB has brought
enforcement actions to halt a variety of harmful negative option
practices, which have primarily relied on the CFPA's prohibition on
unfair, deceptive, and abusive acts or practices.\8\ For example, the
CFPB has brought multiple enforcement actions involving optional ``add-
on'' products offered to credit card users, such as debt protection and
identity protection products, which featured recurring fees that
continued until consumers affirmatively cancelled.\9\ In other
enforcement actions involving negative option practices, the CFPB has
found or alleged that consumer reporting companies,\10\ debt relief
companies,\11\ credit repair companies,\12\ payment processors,\13\ and
service providers \14\ have engaged in unfair, deceptive, and abusive
acts or practices.
---------------------------------------------------------------------------
\8\ 12 U.S.C. 5531, 5536.
\9\ See CFPB v. Sterling Jewelers, Inc., No. 1:19-cv-00448
(S.D.N.Y. 2019); First National Bank of Omaha, File No. 2016-CFPB-
0014 (Aug. 25, 2016) (consent order); Citibank, N.A., File No. 2015-
CFPB-0015 (July 21, 2015) (consent order); Synchrony Bank, f/k/a GE
Capital Retail Bank, No. 2014-CFPB-0007 (June 19, 2014) (consent
order); Bank of America, N.A., File No. 2014-CFPB-0004 (Apr. 9,
2014) (consent order); American Express Centurion Bank, File No.
2013-CFPB-0011 (Dec. 24, 2013) (consent order); Discover Bank, File
No. 2012-CFPB-0005 (Sept. 24, 2012) (joint consent order with FDIC);
Capital One Bank, (USA) N.A., 2012-CFPB-0001 (July 18, 2012)
(consent order). For a description of consumer protections
applicable to credit card add-on products and the CFPB's compliance
expectations regarding such products, see Marketing of Credit Card
Add-on Products, CFPB Bulletin 2012-06 (July 18, 2012).
\10\ CFPB v. Transunion, No. 1:22-cv-01880 (N.D. Ill. 2022);
Equifax Inc., File No. 2017-CFPB-0001 (Jan. 3, 2017) (consent
order); Transunion Interactive, Inc., File No. 2017-CFPB-0002 (Jan.
3, 2017) (consent order).
\11\ CFPB v. Student Financial Aid Services, Inc., No. 2:15-cv-
00821 (E.D. Cal. 2015).
\12\ CFPB v. Prime Marketing Holdings, LLC, No. 2:16-cv-07111
(C.D. Cal. 2016).
\13\ CFPB v. ACTIVE Network, LLC, No. 4:22-cv-00898 (E.D. Tex.
2022).
\14\ CFPB v. Affinion Group Holdings, Inc., No. 5:15-cv-01005
(D. Conn. 2015); CFPB v. Intersections Inc., No. 1:15-cv-835 (E.D.
Va. 2015).
---------------------------------------------------------------------------
The CFPB has also relied on other Federal consumer financial laws
that it enforces to address certain harmful negative option marketing
practices. The Electronic Fund Transfer Act (EFTA) and Regulation E
prohibit preauthorized electronic fund transfers from a consumer's bank
account without written authorization.\15\ The TSR also prohibits
deceptive acts or practices by telemarketers, including failing to
disclose the material terms of a negative option feature of an offer
and misrepresenting the total cost to purchase goods or services.\16\
---------------------------------------------------------------------------
\15\ See 15 U.S.C. 1693e(a); 12 CFR 1005.10(b); see also CFPB v.
Student Financial Aid Services, Inc., No. 2:15-cv-00821 (E.D. Cal.
2015). The CFPB described these requirements in more detail in a
2015 compliance bulletin. See Requirements for Consumer
Authorization for Preauthorized Electronic Fund Transfers, CFPB
Compliance Bulletin 2015-06 (Nov. 23, 2015).
\16\ 16 CFR 310.3(a)(1)(vii), (a)(2)(i); see also CFPB v. Prime
Marketing Holdings, LLC, No. 2:16-cv-07111 (C.D. Cal. 2016);
Citibank, N.A., File No. 2015-CFPB-0015 (July 21, 2015) (consent
order); CFPB v. Student Financial Aid Services, Inc., No. 2:15-cv-
00821 (E.D. Cal. 2015).
---------------------------------------------------------------------------
Recently, the CFPB and FTC have taken action to combat the rise of
digital dark patterns, which are design features used to deceive,
steer, or manipulate users into behavior that is profitable for a
company, but often harmful to users or contrary to their intent.\17\
Dark patterns can be particularly harmful when paired with negative
option programs, causing consumers to be misled into purchasing
subscriptions and other services with recurring charges and making it
difficult for consumers to cancel and avoid such charges.\18\
---------------------------------------------------------------------------
\17\ See, e.g., FTC v. Age of Learning, Inc., No. 2:20-cv-07996
(C.D. Cal. 2020); Statement of CFPB Director Rohit Chopra on
Complaint Against ACTIVE Network (Oct. 18, 2022), https://www.consumerfinance.gov/about-us/newsroom/statement-of-cfpb-director-rohit-chopra-on-complaint-against-active-network/.
\18\ See Bringing Dark Patterns to Light at 11-15 (FTC Sept.
2022), https://www.ftc.gov/system/files/ftc_gov/pdf/P214800%20Dark%20Patterns%20Report%209.14.2022%20-%20FINAL.pdf.
---------------------------------------------------------------------------
Analysis
The CFPB is issuing this Circular to emphasize that covered persons
and service providers who engage in negative option marketing are
required to comply with the CFPA's prohibition on unfair, deceptive,
and abusive acts or practices.\19\ The CFPB further emphasizes that its
approach to negative option marketing is generally in alignment with
the FTC's approach to section 5 of the FTC Act as set forth in its
recent policy statement. In particular, the CFPB shares the view that a
seller offering a negative option program risks violating the law if
the seller (1) does not clearly and conspicuously disclose the material
terms of the negative option offer to the consumer, (2) does not obtain
the consumer's informed consent, or (3) misleads consumers who wish to
cancel, erects unreasonable barriers to cancellation, or impedes the
effective operation of promised cancellation procedures.\20\
---------------------------------------------------------------------------
\19\ Sellers should also comply with other consumer protection
laws enforceable by the CFPB that may apply to their conduct, such
as EFTA, Regulation E, and the TSR.
\20\ See FTC Policy Statement, 86 FR 60823-25.
---------------------------------------------------------------------------
Disclosure. Sellers may violate the CFPA's prohibition on deceptive
acts or practices if they misrepresent or fail to clearly and
conspicuously disclose the material terms of an offer for a product or
service with a negative option feature. Under the CFPA, a
[[Page 5729]]
representation or omission is deceptive if it is likely to mislead a
reasonable consumer and is material.\21\ A ``material'' representation
or omission ``involves information that is important to consumers and,
hence, likely to affect their choice of, or conduct regarding, a
product.'' \22\ Where a seller makes a partial disclosure about the
nature of a product or service, its failure to disclose other material
information may be deceptive.\23\ In assessing the meaning of a
representation or omission, the CFPB looks to the overall, net
impression of the communication, meaning that it considers the context
of the entire advertisement, transaction, or course of dealing rather
than evaluating statements in isolation.\24\
---------------------------------------------------------------------------
\21\ See CFPB v. Gordon, 819 F.3d 1179, 1192-93 (9th Cir. 2016).
\22\ Novartis Corp. v. FTC, 223 F.3d 783, 786 (D.C. Cir. 2000)
(quoting In re Cliffdale Assocs., Inc., 103 F.T.C. 110, 165 (1984)).
\23\ See, e.g., Sterling Drug Inc. v. FTC, 741 F.2d 1146, 1154
(9th Cir. 1984) (drug company's failure to disclose that its drug
only contained ordinary aspirin was misleading when its
advertisements implied that the drug did not contain aspirin); see
also FTC v. Bay Area Business Council, Inc., 423 F.3d 627, 635 (7th
Cir. 2005) (``[T]the omission of a material fact, without an
affirmative misrepresentation, may give rise to an FTC Act
violation.'').
\24\ See, e.g., CFPB v. Aria, 54 F.4th 1168, 1173 (9th Cir.
2022); Gordon, 819 F.3d at 1193; see also FTC v. E.M.A. Nationwide,
Inc., 767 F.3d 611, 631 (6th Cir. 2014); Fanning v. FTC, 821 F.3d
164, 170 (1st Cir. 2016).
---------------------------------------------------------------------------
The material terms of a negative option offer would typically
include the following, to the extent applicable:
That the consumer is enrolling in and will be charged for
the product or service.
The amount (or range of amounts) that the consumer will be
charged.
That charges will be on a recurring basis unless the
consumer takes affirmative steps to cancel the product or service.
That, in a trial marketing plan, charges will begin (or
increase) after the trial period unless the consumer takes affirmative
action.\25\
---------------------------------------------------------------------------
\25\ This list is not exhaustive, and additional terms of a
negative option offer may be material depending on the facts and
circumstances.
---------------------------------------------------------------------------
A seller would likely violate the CFPA by misrepresenting or
failing to adequately disclose these material terms, as the CFPB's
enforcement cases illustrate. For example, the CFPB found that consumer
reporting agencies deceptively represented that credit-related products
were ``free'' when, in reality, consumers who signed up for a ``free''
trial were automatically enrolled in a subscription program with a
recurring monthly fee unless they cancelled.\26\ In those cases,
disclosures about the negative option feature were often displayed in
fine print, in low contrast, and were generally placed in a less
prominent location, such as the bottom of a web page, grouped with
other disclosures. Thus, the disclosures were neither clear nor
conspicuous. Similarly, in several credit card add-on cases, the CFPB
found that credit card issuers engaged in deceptive marketing and
enrollment practices where they did not adequately inform consumers
that they were purchasing add-on products or misrepresented the cost of
the add-on products.\27\
---------------------------------------------------------------------------
\26\ Equifax Inc., File No. 2017-CFPB-0001 (Jan. 3, 2017)
(consent order); Transunion Interactive, Inc., File No. 2017-CFPB-
0002 (Jan. 3, 2017) (consent order).
\27\ See, e.g., First National Bank of Omaha, File No. 2016-
CFPB-0014 (Aug. 25, 2016) (consent order); Synchrony Bank, f/k/a GE
Capital Retail Bank, No. 2014-CFPB-0007 (June 19, 2014) (consent
order); Bank of America, N.A., File No. 2014-CFPB-0004 (Apr. 9,
2014) (consent order).
---------------------------------------------------------------------------
Consent. Sellers engaged in negative option marketing would likely
violate the CFPA where they fail to obtain the consumer's informed
consent before charging the consumer.\28\ Consent will generally not be
informed if, for example, a seller mischaracterizes or conceals the
negative option feature, provides contradictory or misleading
information, or otherwise interferes with the consumer's understanding
of the agreement. The CFPB has brought deception and unfairness claims
under the CFPA where sellers failed to obtain consumers' informed
consent.\29\
---------------------------------------------------------------------------
\28\ Cf. FTC v. Kennedy, 574 F. Supp. 2d 714, 721 (S.D. Tex.
2008) (defendant engaged in unfair practice in violation of section
5 of the FTC Act by imposing charges on consumers' telephone bills
without obtaining their informed consent).
\29\ A seller offering a negative option program must also
comply with 12 U.S.C. 5531(d), which provides that an act or
practice is abusive if it (1) materially interferes with a
consumer's ability to understand a term or condition of a consumer
financial product or service or (2) takes unreasonable advantage of
the consumer's (a) lack of understanding of the material risks,
costs, or conditions of the product or service; (b) inability to
protect their interests in selecting or using a consumer financial
product or service; or (b) reasonable reliance on a covered person
to act in the consumer's interests.
---------------------------------------------------------------------------
With respect to deception, as noted, a representation is deceptive
if it is likely to mislead a reasonable consumer and is material.\30\
In the credit card add-on cases, the CFPB found that credit card
issuers engaged in a deceptive practice when the card issuers falsely
represented to consumers that they were agreeing to receive information
about an add-on product rather than purchasing the product.\31\
---------------------------------------------------------------------------
\30\ See Gordon, 819 F.3d at 1192-93.
\31\ Fifth Third Bank, File No. 2015-CFPB-0025 (Sept. 28, 2015)
(consent order); Bank of America, N.A., File No. 2014-CFPB-0004
(Apr. 9, 2014) (consent order).
---------------------------------------------------------------------------
With respect to unfairness, an act or practice is unfair if it
causes or is likely to cause substantial injury to consumers which is
not reasonably avoidable by consumers and the injury is not outweighed
by countervailing benefits to consumers or to competition.\32\ Applying
that standard, the CFPB alleged that a debt relief company engaged in
an unfair practice by charging consumers on an automatic, recurring
basis where the recurring charges were not clearly explained or
disclosed to consumers at the time of purchase.\33\
---------------------------------------------------------------------------
\32\ 12 U.S.C. 5531(c).
\33\ CFPB v. Student Financial Aid Services, Inc., No. 2:15-cv-
00821 (E.D. Cal. 2015). Specifically, the CFPB alleged that the
company's practice caused injuries by subjecting consumers to
charges they did not authorize or bargain for, those injuries were
not reasonably avoidable because the fact of the recurring charges
and negative option feature were not clearly explained or disclosed
to consumers, and the injury was not outweighed by any
countervailing benefits to consumers or competition.
---------------------------------------------------------------------------
Cancellation. It is understandable that sellers will generally
prefer to retain their existing customers, but they must do so in a
manner that complies with the CFPA. For purposes of the prohibition on
deception, certain types of representations are presumed to be
material, including express representations and representations
regarding costs.\34\ Consistent with that principle, the CFPB found
that a credit card issuer engaged in a deceptive practice when it
represented that consumers could cancel an add-on product
``immediately'' and with ``no questions asked'' but then directed sales
representatives to repeatedly rebut requests to cancel, with the result
that consumers were often unable to cancel unless they demanded
cancellation multiple times in succession.\35\ The CFPB has also found
that sellers engaged in deceptive practices by making
misrepresentations about the costs and benefits of their products and
services in order to persuade consumers not to cancel.\36\
---------------------------------------------------------------------------
\34\ See Novartis Corp., 223 F.3d at 786.
\35\ First National Bank of Omaha, File No. 2016-CFPB-0014 (Aug.
25, 2016) (consent order).
\36\ Citibank, N.A., File No. 2015-CFPB-0015 (July 21, 2015)
(consent order); Capital One Bank, (USA) N.A., 2012-CFPB-0001 (July
18, 2012) (consent order).
---------------------------------------------------------------------------
In addition, the CFPB agrees with the FTC that sellers would likely
violate the law if they erect unreasonable barriers to cancellation or
fail to honor cancellation requests that comply with their promised
cancellation procedures. Such conduct would include, for example,
``[h]ang[ing] up on consumers who call to cancel; plac[ing] them on
hold for an unreasonably long time; provid[ing] false information about
how to cancel; or misrepresent[ing] the
[[Page 5730]]
reasons for delays in processing consumers' cancellation requests.''
\37\ Depending on the facts and circumstances, such conduct may
constitute an unfair, deceptive, or abusive act or practice in
violation of the CFPA.
---------------------------------------------------------------------------
\37\ FTC Policy Statement, 86 FR 60823, 60826.
---------------------------------------------------------------------------
About Consumer Financial Protection Circulars
Consumer Financial Protection Circulars are issued to all parties
with authority to enforce Federal consumer financial law. The CFPB is
the principal Federal regulator responsible for administering Federal
consumer financial law, see 12 U.S.C. 5511, including the Consumer
Financial Protection Act's prohibition on unfair, deceptive, and
abusive acts or practices, 12 U.S.C. 5536(a)(1)(B), and 18 other
``enumerated consumer laws,'' 12 U.S.C. 5481(12). However, these laws
are also enforced by State attorneys general and State regulators, 12
U.S.C. 5552, and prudential regulators including the Federal Deposit
Insurance Corporation, the Office of the Comptroller of the Currency,
the Board of Governors of the Federal Reserve System, and the National
Credit Union Administration. See, e.g., 12 U.S.C. 5516(d), 5581(c)(2)
(exclusive enforcement authority for banks and credit unions with $10
billion or less in assets). Some Federal consumer financial laws are
also enforceable by other Federal agencies, including the Department of
Justice and the Federal Trade Commission, the Farm Credit
Administration, the Department of Transportation, and the Department of
Agriculture. In addition, some of these laws provide for private
enforcement.
Consumer Financial Protection Circulars are intended to promote
consistency in approach across the various enforcement agencies and
parties, pursuant to the CFPB's statutory objective to ensure Federal
consumer financial law is enforced consistently. 12 U.S.C. 5511(b)(4).
Consumer Financial Protection Circulars are also intended to
provide transparency to partner agencies regarding the CFPB's intended
approach when cooperating in enforcement actions. See, e.g., 12 U.S.C.
5552(b) (consultation with CFPB by State attorneys general and
regulators); 12 U.S.C. 5562(a) (joint investigatory work between CFPB
and other agencies).
Consumer Financial Protection Circulars are general statements of
policy under the Administrative Procedure Act. 5 U.S.C. 553(b). They
provide background information about applicable law, articulate
considerations relevant to the Bureau's exercise of its authorities,
and, in the interest of maintaining consistency, advise other parties
with authority to enforce Federal consumer financial law. They do not
restrict the Bureau's exercise of its authorities, impose any legal
requirements on external parties, or create or confer any rights on
external parties that could be enforceable in any administrative or
civil proceeding. The CFPB Director is instructing CFPB staff as
described herein, and the CFPB will then make final decisions on
individual matters based on an assessment of the factual record,
applicable law, and factors relevant to prosecutorial discretion.
Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2023-01560 Filed 1-27-23; 8:45 am]
BILLING CODE 4810-AM-P