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Artificial intelligence and algorithmic processes continue to remain at the top of federal law enforcement agencies’ agendas. Yesterday, the FTC, CFPB, DOJ, and EEOC issued a joint statement pledging to use their respective tools to “protect the public from bias in automated systems and artificial intelligence.” 

While these agencies’ general commitment to monitoring AI processes

The FTC sent out new penalty offense notices to 670 companies today, warning them that failure to substantiate product claims could result in civil penalties of more than $50,000. The companies also received copies of the FTC’s previously-issued penalty offense notices regarding endorsements and testimonials. This represents the FTC’s fourth round of penalty offense notices

If you’re offering any products or services involving a negative option or automatic renewal plan, pay close attention to the FTC’s announcement today of a proposed rule that would drastically alter requirements for negative option disclosures while simultaneously granting the agency authority to seek redress and civil penalties for misrepresentations unrelated to the negative option transaction itself, such as claims related to underlying products, features, and services.  Among other things, the rule as proposed would require that cancellation be “at least as easy to use as the method the consumer used to initiate the Negative Option Feature,” and that companies obtain consent before trying to “save” a cancellation attempt and provide annual reminders for services that do not involve the physical delivery of goods.

In her dissent, Commissioner Wilson characterized the proposed rule as an “end-run around the Supreme Court’s decision in AMG” and detailed a host of substantive and procedural issues with the proposed rule.

Further analysis and our take below.

Continue Reading FTC Proposes Massive Expansion of Negative Option Rule; Would Provide Redress and Civil Penalty Authority for Deceptive Practices Unrelated to the Negative Option Transaction

On March 13, 2023, the FTC submitted its 2024 budget request to Congress, along with a performance plan for FY 2023-2024 and a performance report for FY 2022. While generally an aspirational document, the budget includes a few notable asks that provide clues about agency priorities in the consumer protection space:

  • More money: The FTC is requesting a budget of $590 million and 1,690 full-time staff. By comparison, the FTC requested $490 million and 1,440 FTEs in its 2023 budget and $389 million and 1,250 FTEs in its 2022 budget. In relation to the agency’s 2020 requested budget ($312 million), this represents nearly a doubling of agency budget requests in the past four years, further emphasizing Chair Khan’s commitment to increasing the agency’s influence and impact.
  • More investigations, especially in privacy and data security: The Privacy and Identity Protection program is slated to receive the most additional full-time employees (FTEs) under the expanded budget request (from 79 to 103 proposed FTEs), with Financial Practices and Marketing Practices in the runner-up spots (14 and 12 FTE increases, respectively). The FTC states it intends to use additional resources in part to investigate and litigate more matters involving health privacy and children’s privacy; unfair or deceptive practices by platforms; frauds using new technologies in the areas of online and mobile transactions; harmful practices in multilevel marketing and the gig economy; and unlawful conduct in the fintech and payment processing space.

Continue Reading Reading the Tea Leaves in the FTC’s 2024 Congressional Budget Request

Join members of Kelley Drye’s Advertising, Privacy, and Financial Services teams on March 8, 2023 at 12:30-1:30 ET for an overview of hot topics and issues to watch for in 2023 in fintech and financial services.

Both the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) have set an aggressive agenda for

On February 9, the FTC provided the CFPB with its annual summary of activities enforcing the Equal Credit Opportunity Act (ECOA). The release of this summary provides a great opportunity for a round-up and some updates on new developments in this space over the past year.

What is ECOA?

ECOA prohibits discrimination in consumer credit transactions on the basis of a number of protected categories, including race, color, religion, national origin, sex, marital status, and age. The statute’s prohibition covers “any aspect of a credit transaction” – a phrase that has been interpreted by the CFPB to cover creditor activities before, during, and after the extension of credit. In addition, creditors who deny a credit application, provide substantially less credit than requested, or make a change in the terms of an existing credit agreement, must provide applicants with specific reasons for the “adverse action.” Regulation B implements ECOA’s requirements and sets out more detailed rules for creditors to follow.

Continue Reading ECOA and Beyond: Recent Updates and Developments in Discrimination Enforcement

Downloading an app, buying a product or service, or otherwise interacting with a company frequently requires consumers to consent to multi-page contracts. In a new proposed rule, the CFPB would require nonbank financial companies subject to the CFPB’s supervisory jurisdiction to register any use of such form contracts if they contain terms that seek to waive or limit consumer rights and legal protections.  Here are more details:

Registration requirements would apply to companies using form contracts (contracts drafted prior to the transaction for use in multiple transactions between the company and consumers). In addition, the form contracts must contain certain “covered terms and conditions,” as described below. This information would be made publicly available on the CFPB’s website.

Continue Reading CFPB Tackles Fine Print in Consumer Financial Contracts

No, we’re not talking about sinister sewing guides, but rather practices or formats that may manipulate or mislead consumers into taking actions they would not otherwise take.

We untangled the topic of so-called “dark patterns” in two in-depth blogs earlier this year, available here and here. At that time, we noted there was a