The Federal Trade Commission recently announced that it has entered into a settlement with Bridge It, Inc. (“Brigit”), the operator of a personal finance mobile application, to resolve the FTC’s allegations that Brigit engaged in unfair and deceptive acts or practices in violation of Section 5 of the FTC Act and engaged in conduct that violated the Restore Online Shoppers’ Confidence Act (“ROSCA”). In addition to prohibiting Brigit from continuing to engage in certain conduct and requiring it to take various corrective actions, the Stipulated Order requires Brigit to pay $18 million in consumer redress.
According to the FTC’s complaint filed in a New York federal district court, Brigit advertises its app as a tool that provides alerts and offers short-term cash advances when a consumer’s bank account is running low. It offers two membership plans: a free membership that includes alerts for low account balances and a membership with a $9.99 monthly fee that provides access to cash advances and is automatically debited from consumer’s bank accounts (“Plus Membership”). The Plus Membership automatically renews and consumers are charged the monthly membership fee each month until a consumer takes affirmative steps to cancel.
The FTC alleged that Brigit advertised that Plus members can receive cash advances up to $250, their Plus Membership includes “instant” delivery of such advances, Brigit does not charge late fees or interest on outstanding cash advances, and Plus members can cancel at any time. However, in reality, as alleged by the FTC, few Plus members are eligible to receive cash advances up to $250, many are not eligible to receive cash advances at all, an additional fee was imposed for a consumer to receive an immediate cash advance, and a consumer cannot cancel while an advance remains outstanding.
The FTC also alleged that “Brigit has made it difficult for consumers to cancel their subscriptions by using design tricks, sometimes referred to as ‘dark patterns,’ requiring consumers to navigate through numerous confusing screens littered with impediments to cancellation.” As alleged by the FTC, “Brigit intentionally adopted many of these dark patterns” and received complaints from consumers “that they were confounded by the complexity of Brigit’s cancellation process, and were unable to cancel, or had great difficult cancelling, their accounts.”
The FTC alleged that Brigit engaged in (1) deceptive acts and practices in violation of the FTC Act by making false and misleading representations about consumers’ ability to obtain cash advances up to $250, to get cash advances at no additional cost, and to cancel at any time without paying any fees, interest, or other charges on an outstanding advance, and (2) unfair acts and practices in violation of the FTC Act by charging consumers without their consent. (It appears that the unfairness claim is based the FTC’s allegation that Brigit continued to charge the monthly fee to consumers with an outstanding advance who had attempted to cancel without informing them they would be required to repay outstanding advances to stop paying the monthly fee.)
In its complaint, the FTC characterized the manner in which Brigit advertised and sold its Plus Membership as a negative option feature. It alleged that in using the negative option feature, Brigit violated ROSCA’s requirements for sellers using negative option features (which consist of the disclosure of all material terms before obtaining a consumer’s’ billing information, obtaining the consumer’s informed consent before making the charge, and providing a simple mechanism to stop recurring charges.) In addition to a provision prohibiting Brigit from making various misrepresentations regarding the terms of cash advances, the settlement includes provisions specifically directed at Brigit’s use of a negative option feature. These provisions prohibit Brigit from misrepresenting various facts about a negative option feature, representing that a negative option feature is being offered on a free, no obligation, or discounted basis without making certain disclosures, obtaining billing information without making certain disclosures, failing to provide a confirmation after a consumer submits an order, failing to obtain a consumer’s informed express consent for a negative option feature, and failing to provide a simple cancellation mechanism. The negative option provisions include specific steps Brigit must take to satisfy the prohibitions.
In January 2023, the CFPB issued a circular that addresses the circumstances under which “negative option marketing practices” can violate the CFPA prohibition of unfair, deceptive, or abusive acts or practices. In April 2023, the CFPB issued a policy statement setting forth a framework for determining what constitutes abusive conduct. In the statement, the CFPB indicated the use of dark patterns can constitute abusive conduct if they have the effect of making the terms and conditions of a transaction materially less accessible or salient. The policy statement is the subject of a recent episode of our Consumer Finance Monitor Podcast, “A Deep Dive Into The Consumer Financial Protection Bureau’s Policy Statement On Abusive Acts And Practices Under The Consumer Financial Protection Act.” Click here to listen to the episode.