On January 22, 2024, the Federal Trade Commission (FTC) entered into a Stipulated Order for Permanent Injunction, Monetary Judgment, and Other Relief (the “Order”) with FloatMe Corp. (“FloatMe”), a fintech that offers short-term cash advances through its mobile app, to settle litigation brought earlier in the month against the fintech and two of its principals (collectively, “Defendants”). As detailed in our earlier blog, the FTC’s complaint claimed the Defendants’ practices, including alleged misrepresentations, imposition of undisclosed or hidden fees, and failure to consider income derived from public assistance, violated the FTC Act, the Restore Online Shoppers’ Confidence Act (ROSCA), and the Equal Credit Opportunity Act (ECOA).

In addition to requiring a $3 million payment to the FTC as monetary relief, the Order imposes a number of enhanced compliance requirements on Defendants. The Order prohibits specific misrepresentations, including that any good or service with a Negative Option Feature is offered on a “free,” “trial,” “sample,” “bonus,” “gift,” “no obligation,” or “discounted” basis, and, in the next section, requires that any representation that a good or service with a Negative Option Feature is being offered on a “free,” “trial,” “no obligation,” “reduced,” or “discounted” basis be accompanied by “Clear and Conspicuous” (as extensively defined in the Order) disclosures related to the cost, timing, and the extent to which the consumer must take affirmative action to avoid any charges. “Clear and Conspicuous” disclosures are also required whenever a consumer’s billing information is obtained for any transaction involving a good or service with a Negative Option Feature.

The Order also requires that consumers must affirmatively select or sign to accept the Negative Option Feature by itself (i.e. not as part of a broader purchase confirmation) on the same screen or page as a series of “Clear and Conspicuous” disclosures. Additionally, there is a requirement to have a simple and easy-to-find mechanism for canceling and avoiding any charges from a good or service with a Negative Option Feature.

In addition to mandating that Defendants rewrite their disclosures and recode their user interface, the Order requires Defendants to establish a Fair Lending Program with a fair lending compliance manager, required trainings, and new policies and procedures. While the complaint against Defendants focused on discrimination on the basis of receipt of public income, the Fair Lending Program must cover all of the prohibited bases, and, for 10 years after the entry of the Order, Defendants must submit a copy of any complaint alleging discrimination, and any response, to the FTC.

Many of the obligations imposed by the Order, particularly those related to the Negative Option Feature, require Defendants to go above and beyond the current requirements of law and regulation. In many respects, these requirements are similar to those that would be implemented under the FTC’s proposed “click to cancel” amendments to the Negative Option Rule. However, since that proposed regulation has not been finalized, it appears that in this instance, the FTC has prejudged the results of the rulemaking process, imposing its desired approach on the Defendants via enforcement before a final rule has been officially adopted.

Companies offering subscription or other automatic renewal programs should pay careful heed to both the alleged deficiencies identified by the FTC and the enhanced obligations imposed by the Order.