On December 16, 2021, the Federal Trade Commission issued another reminder of just how aggressively the consumer protection agency continues to regulate negative option marketing. The terms are a reminder that consulting with an experienced FTC defense lawyer regarding ROSCA and government advertising regulation compliance – up-front – is a way to minimize risk exposure.
According the FTC, MyLife.com, Inc. and its CEO have been banned from engaging in deceptive negative option marketing and will pay $21 million following allegations that they tricked consumers with “teaser background reports” and trapped them in difficult-to-cancel subscription programs.
As per the complaint filed in July 2020 by the Department of Justice on behalf of the Federal Trade Commission, MyLife.com and its CEO claimed that the company’s background reports on particular individuals may contain arrest, criminal, and sexual offender records—even when they allegedly did not include such information—to try to trick consumers into signing up for auto-renewing, premium subscriptions.
The complaint further alleged that, in many instances, consumers who searched the MyLife.com website for an individual’s background report were shown search results that imply, often falsely, that the subject of a search may have records of criminal or sexual offenses—records that can be viewed only by purchasing a MyLife subscription. The alleged that MyLife’s misleading statements led some consumers to believe they or other individuals had arrest or criminal records when they did not, or when they only had minor traffic citations.
Specific legal allegations included that MyLife operated as a consumer reporting agency and violated the Fair Credit Reporting Act (FCRA) by, among other things, failing to maintain reasonable procedures to verify how its reports would be used, to ensure the information was accurate, and to make sure that the information it sold would be used only for legally permissible purposes. The complaint also alleged that MyLife’s misleading billing practices violated the Restore Online Shoppers’ Confidence Act by, for example, failing to clearly disclose upfront charges, or that consumers’ subscription would automatically renew. MyLife also violated the Telemarketing Sales Rule by misrepresenting its refund and cancellation policies, the complaint alleged.
“MyLife lured consumers into hard-to-cancel negative option subscriptions by preying on fears that MyLife’s reports would harm their reputations or ability to find jobs or housing,” said FTC attorney Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “These extortionary tactics broke the law, and MyLife and its CEO have been banned from negative option marketing and ordered to clean up their practices.”
“The Department of Justice and the FTC work hard to protect consumers from deceptive sales practices like those at issue here,” said Acting Assistant Attorney General Brian M. Boynton of the Justice Department’s Civil Division. “This is a win for consumers, who should not be subjected to misleading statements and marketing tactics.”
As part of the settlement, the CEO and MyLife agreed to separate judgments totaling $33.9 million. The former will pay a total of $5 million and MyLife will pay a partially suspended judgment of $16 million due to the company’s inability to pay the full amount. The FTC has stated that the money will be used to provide refunds to consumers. MyLife will be required to pay the full remaining amount of the judgment if the company is found to have misrepresented its finances.
The CEO and MyLife are also permanently banned from offering any product with a negative option feature and engaging in the types of deceptive conduct outlined in the complaint including implying that someone who has received a traffic violation has a criminal record. In addition, MyLife also is required to implement a monitoring program to ensure the company is complying with the FCRA.
Richard B. Newman is an FTC defense lawyer at Hinch Newman LLP. Follow FTC defense attorney on LinkedIn: FTC defense lawyer.
Informational purposes only. Not legal advice. May be considered advertising material.
