Weekly Fintech Focus

• On November 3, 2022, the Federal Trade Commission (FTC) announced that an internet phone service provider has agreed to a proposed court order that aims to stop it from imposing junk fees and creating obstacles to those who try to cancel its services.
• On October 31, 2022, the Consumer Financial Protection Bureau (CFPB) announced that it will reopen the public comment period relating to its market monitoring efforts of six large technology companies that operate payment services. The agency also plans to expand its monitoring efforts by asking additional questions that seek input on these companies’ acceptable use policies and their use of fines, liquidated damages provisions, and other penalties.
• On October 27, 2022, the Office of the Comptroller of the Currency (OCC) announced that it will establish an Office of Financial Technology to support the agency’s expertise and ability to adapt to a changing banking landscape.

FTC Action Against Internet Phone Service Provider Results in $100 Million to Customers Trapped by Illegal Dark Patterns and Junk Fees When Trying To Cancel Service

On November 3, 2022, the Federal Trade Commission (FTC) announced that an internet phone service provider has agreed to a proposed court order that aims to stop it from imposing junk fees and creating obstacles to those who try to cancel its services.

According to the FTC, the provider enabled customers to easily sign up for its plans but used dark patterns that made cancellation substantially more difficult, which ultimately harmed consumers. In particular, the FTC’s complaint alleges that the provider: (1) eliminated cancellation options, (2) made the cancellation process difficult, (3) surprised customers with expensive junk fees when they tried to cancel, and (4) continued to charge customers even after they had canceled.

The FTC’s complaint also highlights specific practices that it alleged to be harmful to consumers, such as: (1) forcing customers into one cancellation method (e.g., only by speaking to a live “retention agent” on the phone), (2) making it difficult to find the appropriate phone number on the company’s website, (3) not transferring customers to that number in a consistent manner, (4) reducing the hours the phone line was available, and (5) failing to provide promised callbacks.

As a result of the FTC’s action, the provider agreed to a proposed court order that requires it to:  (1) obtain consumers’ express, informed consent prior to charging them; (2) put in place simplified cancellation processes that are easy to find, easy to use, and will be available through the same method the consumer used to enroll; (3) stop using dark patterns to frustrate consumers’ cancellation efforts; (4) be upfront with customers about any negative option subscription plans; and 5) turn over $100 million to the FTC to be used to provide refunds to consumers.

CFPB Seeks Further Public Input on Big Tech Payment Platforms

On October 31, 2022, the Consumer Financial Protection Bureau (CFPB) announced that it will reopen the public comment period relating to its market monitoring efforts of six large technology companies that operate payment services. The agency also plans to expand its monitoring efforts by asking additional questions that seek input on these companies’ acceptable use policies and their use of fines, liquidated damages provisions, and other penalties.

While faster payment systems offer many benefits to consumers, according to the CFPB, the scale and market power of large technology companies raise concerns about potential new risks to consumers and to broader competition in the marketplace. As a result, the CFPB aims to broaden its understanding of these risks and potential policy solutions.

In particular, the CFPB will add two questions:

1. What fees, fines, or other penalties do large technology companies assess on users of their payment platforms, including for:
   1. Purported violations of the technology companies’ acceptable use policies; or
   1. Any other conduct?
2. Do the acceptable use policies for technology companies’ payment platforms include provisions that can restrict access to their platforms? If so, under what circumstances can the technology companies restrict access to their platforms?

In October 2021, the CFPB ordered these same technology companies to provide information about their business practices, including their data collection and use, their policies for removing individuals or businesses from their platforms, and their policies and practices for adhering to key consumer protections. Following its 2021 order, the agency released a report in August 2022 that outlined consumer risks stemming from financial services companies’ ability to aggregate and monetize consumer financial data.

OCC Announces Office of Financial Technology

On October 27, 2022, the Office of the Comptroller of the Currency (OCC) announced that it will establish an Office of Financial Technology to support the agency’s expertise and ability to adapt to a changing banking landscape.

Against the backdrop of a growing number of bank-fintech partnerships, Acting Comptroller of the Currency Michael J. Hsu stated that the OCC needs “to have a deep understanding of financial technology and the financial technology landscape” so that it can ensure “the federal banking system is safe, sound, and fair today and well into the future.”

The new office, to be established early next year, will build on and incorporate the Office of Innovation. The new office will be led by a chief financial technology officer, who will be a deputy comptroller reporting to the senior deputy comptroller for bank supervision policy. The office will provide strategic leadership, vision, and perspective for the OCC’s financial technology activities and related supervision.

The new office announcement follows other recent OCC announcements that similarly emphasize the agency’s increasing focus on fintech companies. In early October, for instance, the OCC released its Bank Supervision Operating Plan, which stated that the agency plans to heighten supervision of relationships between banks and fintech companies.

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