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Financial Services Law Insights and Observations

FTC sues fintech firm for deceiving users and making cancelations difficult

Bank Regulatory FTC Consumer Finance Settlement

On November 3, the FTC filed suit against a fintech firm within the U.S. Southern District Court of New York.  The FTC alleged the fintech mobile app misled customers, “violated Section 5 of the FTC Act[,] and made it hard to cancel services in violation of the Restore Online Shoppers’ Confidence Act (ROSCA).” However, the FTC and Defendant stipulated the entry of a proposed settlement order that includes a monetary judgment of $18 million for consumer refunds and requires Defendant to stop its deceptive marketing practices and end tactics that prevented customers from canceling services. The first time the FTC had collected civil penalties under ROSCA was in January 2023, as covered by InfoBytes here.

The FTC’s complaint alleges that consumers were deceived into signing up for a $250 cash advance, but many users were unable to receive any money at all. Furthermore, consumers had to have first entered a $9.99 monthly membership––regardless of whether they qualified for the $250 or not. Further, if a user wished to cancel their monthly membership, the fintech firm employed “dark” and manipulative design tricks to “create a confusing and misleading cancellation process that prevented consumers from canceling their subscriptions.” The FTC’s proposed settlement order must first be approved by a federal judge before it can go into effect.