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Financial Services Law Insights and Observations

CFPB sues payment processor over junk fees and dark patterns

Federal Issues CFPB Enforcement Junk Fees Dark Patterns CFPA EFTA UDAAP Consumer Finance Payment Processors

Federal Issues

On October 18, the CFPB filed a complaint against a Texas-based payment processing service platform (primarily related to collecting and processing event fees) for allegedly violating the Consumer Financial Protection Act (CFPA) and the EFTA by engaging in deceptive and abusive acts and practices. The Bureau alleged that the defendant enrolled consumers in, and charged them, for discount club memberships without their consent that were largely unrelated to the event the consumers were signing up for. The complaint noted that although the defendant’s memberships had a 30-day free “negative option trial membership,” the memberships automatically begin charging the membership fees at the end of the trial period. The Bureau also alleged that the defendant deployed dark patterns, which “are hidden tricks or trapdoors that companies build into their websites to get consumers to inadvertently click links, sign up for subscriptions, or purchase products or services.” The Bureau further alleged that the defendant violated the EFTA and Regulation E by increasing consumers’ membership fees without sending the consumer written notice of the new amount and the date of the new payment at least 10 days before initiating the new payment, which also constitute violations of the CFPA. The Bureau is seeking permanent injunctive relief, damages, restitution, disgorgement, civil money penalties, and other relief.

According to a statement by CFPB Director Rohit Chopra, the Bureau is “closely watching whether financial services firms are deploying digital dark patterns,” and is “looking at a range of ways to reduce unwanted junk fees.” He also added that the Bureau is “working to ensure our payments system is working safely and fairly” and that it “will continue to look at how payment platforms extract data and fees from their users.”