On December 15, a district judge in California approved a settlement between MyLife.com, Inc. (MyLife), its CEO Jeffrey Tinsley, and the Department of Justice (DOJ) on behalf of the Federal Trade Commission (FTC). The settlement bans MyLife and Tinsley from engaging in deceptive negative option marketing and requires them to pay $21 million due to allegations that they tricked consumers with “teaser background reports” and trapped consumers in difficult-to-cancel subscription programs. MyLife is a company that sells consumer background reports.
The complaint filed in July 2020 alleged that MyLife claimed background reports on particular individuals would contain arrest, criminal, and sexual offender records — even when they did not include such information — to try to trick consumers into signing up for auto-renewing subscriptions. The complaint also alleged that consumers who searched the website for an individual’s background report were shown search results that implied, often falsely, that the individual had a record of criminal or sexual offenses. These records could be viewed only by purchasing a MyLife subscription. Additionally, the DOJ alleged that MyLife’s statements led some consumers to believe they or other individuals had arrest or criminal records when they did not, or when they only had minor traffic citations.
The DOJ alleged MyLife’s practices violated several different laws. First, the complaint alleged that MyLife operated as a consumer reporting agency and violated the Fair Credit Reporting Act (FCRA) by, among other things, failing to (1) maintain reasonable procedures to verify how its reports would be used, (2) ensure the information was accurate, and (3) make sure that the information it sold would be used only for legally permissible purposes. The complaint also alleged that MyLife’s misleading billing practices violated the Restore Online Shoppers’ Confidence Act (ROSCA) by failing to clearly disclose upfront charges or that consumers’ subscription would automatically renew. MyLife also allegedly violated the Telemarketing Sales Rule (TSR) by misrepresenting its refund and cancellation policies.
As part of the settlement, Tinsley and MyLife agreed to separate judgments totaling $33.9 million. Tinsley will pay a total of $5 million and MyLife will pay a partially suspended judgment of $16 million due to the company’s inability to pay the full amount. The money will provide refunds to consumers. Tinsley and MyLife also are permanently banned from offering any product with a negative option feature and from engaging in the types of deceptive conduct outlined in the complaint, including implying that someone who has received a traffic violation has a criminal record. In addition, MyLife also must implement a monitoring program to ensure the company’s compliance with the FCRA.
Our Take. The FTC is making good on its promise to ramp up enforcement efforts on autorenewal and negative option marketing companies, as we discussed here. We expect the FTC to continue to scrutinize these companies to ensure consumer protection.