As the new Federal Trade Commission leadership continues to shape its consumer protection agenda, we look to recent enforcement and rulemaking activity for insight into the agency's current priorities—and a recent settlement indicates that enforcement of the Restore Online Shoppers' Confidence Act ("ROSCA") remains one of them.
Online cash advance company Cleo AI recently agreed to pay $17 million to settle FTC allegations that it violated Section 5(a) of the FTC Act and ROSCA by deceiving consumers with false promises of instant or same-day access to cash advances and making it difficult for consumers to cancel their subscriptions.
As described in the complaint, Cleo promises consumers access to cash advances of hundreds of dollars "today" or "instantly." When consumers attempt to obtain such advances, they are presented with two subscription options for which Cleo charges monthly fees. Despite its representations, the FTC alleges that, in fact, Cleo limits its cash advances to below the advertised amounts, and these advances could take days to arrive.
Further, according to the FTC, Cleo violates ROSCA by failing to clearly and conspicuously disclose, before obtaining consumers' billing information, as required, all material transaction terms and by failing to provide simple mechanisms for consumers to cancel their subscriptions. For instance, until late 2023, Cleo allegedly prevented consumers with an outstanding balance from canceling their subscriptions until the cash advance was fully repaid, forcing consumers to pay additional monthly fees for subscriptions they did not want.
The proposed settlement order would prohibit Cleo from misleading consumers about its advances and would require the company to clearly and conspicuously disclose the material terms of any subscription, to get consumers' express informed consent before charging them, and to provide a simple cancellation mechanism. The $17 million payment would be used to provide refunds to harmed consumers.
This action, as well as the upcoming effective dates for many of the FTC's "click-to-cancel" rule requirements (May 14) and amendments to California's auto-renewal law (July 1), underscore the importance of promptly reviewing your subscription flows for compliance.
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