The Federal Trade Commission recently announced a settlement with Bridget, a personal finance mobile app operator, to resolve FTC allegations that it engaged in unfair and deceptive practices or practices. He was charged with violating Section 5 of the FTC Act and the Restoration of Online Consumer Confidence Act (“ROSCA”). In addition to prohibiting Brigitte from continuing certain activities and requiring it to take various corrective measures, the injunction also requires Brigitte to pay $18 million in restitution.
According to the FTC’s complaint filed in New York federal district court, Brigitte advertised the app as a tool that provided alerts and offered short-term cash advances when a consumer’s bank account was declining. It offers two membership plans: a membership that includes low account balance alerts and offers cash growth for a $9.99 monthly membership fee with direct debits from user bank accounts (“Plus Membership”). Plus membership will automatically renew and consumers will be charged a monthly membership fee until the consumer takes positive action to cancel.
The FTC alleges that Brigitte Plus members can receive cash advances of up to $250, that their Plus membership includes “fast” delivery of such advances, that Brigitte does not charge interest on late payments or outstanding cash advances, and that Plus members can cancel at any time. . But, in reality, as alleged by the FTC, few Plus members are eligible for cash boosts of up to $250, and many are not eligible to receive cash boosts, where a consumer is charged an extra fee to get instant cash priority. And a consumer can’t cancel an advance while it’s outstanding.
The FTC also found that “Brigit made it difficult for consumers to cancel their subscriptions by using design techniques, sometimes referred to as ‘dark patterns,’ which caused consumers to navigate multiple confusing screens that prevented them from canceling.” As alleged by the FTC, “Brigit knowingly accepted many of these dark patterns” and received complaints from consumers who were “confused by the complexity of Briggit’s cancellation process and were unable to cancel their accounts or found it too difficult to cancel.”
The FTC charged Brigitte with violating the FTC’s rules by (1) engaging in deceptive acts and practices to provide consumers with a financial incentive of up to $250, making false and misleading representations to obtain cash advances at no additional cost, and to cancel without paying any fees, interest, or other charges at any time; and (2) unfair practices and practices that violate the FTC’s rules by overcharging consumers without their consent; (This unfair claim appears to be based on the FTC’s allegation that Brigitte continued to charge users the monthly fee and tried to cancel without notifying them that they would be required to pay past due fees to stop paying the monthly fee.)
In its complaint, the FTC characterized the way Brigitte promoted and sold the Plus membership as a negative alternative. Brigitte violated ROSCA’s requirements for sellers to use the negative option feature (which includes disclosing all material terms before obtaining the consumer’s billing information, obtaining and providing the consumer’s informed consent prior to payment, and providing an easy way to stop repeated payments). In addition to the provision prohibiting you from providing various misrepresentations, the Settlement includes specific provisions for you to use Brigitte’s negative option feature. These provisions prohibit Brigitte from misrepresenting various facts about the Negative Alternative Feature, including by not making certain representations that the Negative Alternative Feature is being offered free, mandatory or at a discounted price, obtaining billing information without making certain statements, failing to provide confirmation after a consumer has placed an order, a consumer’s right to negative alternative feature. Failure to obtain express informed consent and failure to provide an easy cancellation mechanism. Negative option provisions include specific measures to satisfy Brigitte’s exclusions.
In January 2023, the CFPB issued a circular addressing the circumstances under which “adverse alternative marketing practices” violate the CFPA’s prohibition on unfair, deceptive, or abusive practices or practices. In April 2023, the CFBB issued a policy statement that sets out a framework for determining what constitutes misconduct. In the statement, the CFBB noted that the use of dark language may constitute offensive behavior if it has the effect of making the terms and conditions of the transaction materially less accessible or salient. The policy statement is the subject of a recent episode of the Consumer Financial Watchdog podcast, “Toward a Policy Statement by the Consumer Financial Protection Bureau on Abusive Practices and Practices Under the Consumer Financial Protection Act.” Click here to listen to the episode.