The Justice Department and the Federal Trade Commission’s suit against the fintech Dave, filed earlier this week, is the latest in a series of enforcement actions under the Restore Online Shoppers’ Confidence Act (ROSCA). This law has been used to target several organizations over the past year that were accused of extracting unwarranted payments and violating subscribers’ rights.
Passed in 2010, ROSCA forbids any third-party seller from charging a consumer for goods or services sold online without the express consent of the shopper. Consumer must take affirmative action, such as clicking on a confirmation button or checking a box, to indicate approval for the payment. The FTC argues that to comply with ROSCA, companies should make it as easy to cancel a subscription as it is to sign up for one.
Among other violations, the suit against Dave alleges that the cash management app deducted so-called “tips” from user accounts without clear user consent. The complaint also charges Dave with claiming that users’ tips would fund meals for needy children, even though only a small fraction of the money actually went to charity.
A Series of Enforcements
ROSCA has been taking aim at these types of come-ons lately, undermining the subscription model that many merchants rely on today. The act itself is so outdated that it refers to memberships rather than subscriptions.
This recent instance isn’t the first time ROSCA has been enforced. Last June, the FTC filed a complaint alleging that Amazon enrolled millions of consumers into its Prime service without their consent and further made it difficult to cancel the service.
What’s more, earlier this year, telehealth platform Cerebral was ordered to pay $7 million in penalties and refunds for ROSCA violations. The FTC stated that Cerebral sold its subscription services on a negative option basis, meaning a consumer’s non-action was treated as consent to make a payment. Then in September, a federal court forfeited $40 million in assets from a group of defendants who allegedly defrauded consumers nationwide by enrolling them, without their knowledge, into subscription plans to buy CBD and keto-related products.
Most recently, a New York judge ordered SiriusXM to make it easier to cancel its subscriptions. “The policies may not rise to the level of fraud,” he wrote in his opinion, “but they do fail the simple mechanism requirement of ROSCA and constitute a violation of that statute.”
For its part, Dave has called the lawsuit “government overreach.” The company also introduced a new fee structure in December that eliminated the app’s optional tips in hopes of heading off any enforcement action.
