The Path to an $18M Fine is Paved with Good Intentions
App-based nonbank lender Brigit was recently hit with an $18 million fine by the Federal Trade Commission (FTC).
The crux of the enforcement action was that Brigit’s subscription was incredibly difficult to cancel. As a result, customers were charged even after they’d attempted to cancel or indicated they wished to cancel.
“Brigit trapped those consumers least able to afford it into monthly membership plans they struggled to escape from,” said Sam Levine, Director of the FTC’s Bureau of Consumer Protection. “Companies that offer cash advances and other alternative financial products have to play by the same rules as other businesses or face potential action by the FTC.”
The fine represents refunds to consumers who paid into Brigit’s subscription scheme after attempting to cancel.
Brigit claims it is offering a loan product to borrowers who otherwise would have difficulty accessing credit.
In other words, the defense offered by Brigit is that they have good intentions, so the high level of scrutiny is unwarranted.
Jason Mikula at Fintech Business Weekly takes a closer look at the case and says that Brigit may have a point in some areas, but one defense they raise stands out.
Regarding the FTC’s claim that Brigit’s cancellation flow is overly burdensome and thus in violation of ROSCA, a company spokesperson argued its cancellation process is in line with peers in the market.
Mikula notes that Brigit’s cancellation process was confusing at best and certainly difficult to navigate. The first option once a user decided to cancel was a “pause” option which meant billing resumed 31 days after the “pause” was initiated.
Essentially, Brigit says everyone else is using these tactics, we can too.
As Mikula mentions, that defense did not work so well for MoneyLion.
While Brigit is providing something of benefit (access to credit) to an underserved market (low-income borrowers with low credit scores/little credit history), it seems fair to hold them to reasonable standards of business conduct.
It also seems particularly nefarious to profit off of deceiving the very customers you have the “good intentions” of serving.
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