The Federal Trade Commission will require Raging Bull, an online stock trading site, to pay $2.425 million to settle a lawsuit that the company used bogus earnings claims to trick consumers into signing up for subscriptions and then trapping them into plans that were hard to cancel. In addition, the company must get affirmative approval with express, informed consent from consumers before subscribing them, and they must provide them with an easy way to cancel recurring subscription charges.
Other conditions of the settlement include not placing subscribers who call to cancel on hold for longer than 10 minutes, returning voicemail messages with requests for cancellation within one business day, and providing all Raging Bull customers with a notice of the FTC lawsuit and an outline of Raging Bull’s obligations to their customers under the proposed settlement order. As of yesterday evening, the site’s Terms & Conditions, including the company’s refund and cancellation policy, had not yet been updated. The website indicates the terms and conditions were last updated July 6, 2021.
“Raging Bull’s baseless earnings claims and hard-to-cancel subscriptions cost consumers millions,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, in a March 8, 2022 news release. “Today’s proposed order continues the FTC’s crackdown on false earnings claims, returning millions to consumers and requiring click-to-cancel online subscriptions.”
FTC vs. Raging Bull
The FTC originally filed suit against RagingBull.com in December 2020 to call the company out on bogus earnings claims, using customer testimonials that did not represent typical stock earnings. For example, RagingBull.com featured two testimonials from customers who claimed to have made $6,500 in 20 minutes and $500 in 15 minutes. The lawsuit also alleged that the company attempted to profit from the pandemic by promoting related stocks and telling consumers they could also rack up huge profits. In one ad, Raging Bull claimed that the pandemic “might be the most exciting opportunity in decades!”
“Buried in fine print at the bottom of their websites, Defendants admit they do not verify the testimonials they use in advertising and do not track whether consumers who purchase their services make any money at all, much less the kinds of returns advertised. Numerous consumers have purchased Defendants’ programs and found Defendants’ claims to be false,” said the complaint in section 2 of the case summary.
The FTC also said that the majority of consumers do not beat the market or make the kinds of returns advertised by Raging Bill and its principals, such as doubling or tripling their money. In fact, many consumers lost substantial sums of money using the company’s strategy and trade recommendations. The FTC alleged that RagingBull.com customers lost at least $137 million to the scam in the three years prior to the lawsuit. Many of those customers were retirees, older adults or immigrants.
In addition to the bogus earnings claims, Raging Bull charged recurring subscription fees on a quarterly or annual basis. When the consumers tried to cancel their subscriptions to Raging Bull’s services, they were not able to cancel easily. Those who requested refunds were “routinely denied.” When subscribers tried to cancel their subscriptions services to avoid additional recurring charges, they weren’t able to cancel the services online, had trouble reaching customer service representatives, and cancellation instructions were confusing. In many cases, subscribers were charged for the renewal of services they did not want.
The proposed settlement order settles the case between the FTC and RagingBull.com, LLC; Sherwood Ventures, LLC; Jason Bond, LLC, formerly known as Jason P. Kowalik; Jason Bond and Jeff Bishop. The case against Kyle W. Dennis, a trading instructor who offers services through Raging Bull, will continue, the FTC said.
No subscription tricks or traps
RagingBull.com is the FTC’s latest target in their mission to provide consumers with clear, transparent information and to get subscription companies to stop negative option marketing and obtain informed consent instead. Last October, they issued a new 15-page enforcement policy statement outlining their requirements for subscription companies.
“Today’s enforcement policy statement makes clear that tricking consumers into signing up for subscription programs or trapping them when they try to cancel is against the law,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, in an October 29, 2021 news release. “Firms that deploy dark patterns and other dirty tricks should take notice.”
In that statement, the FTC outline three key requirements that subscription companies must follow to avoid criminal and/or civil penalties.
- Subscription companies must clearly and conspicuously disclose all material terms of the subscription product or service, including the cost, deadlines to avoid future charges, the amount and frequency of the charges, how to cancel, and information about the product or service that is needed to stop consumers from being deceived about the characteristics of the product or service. The information must be provided up front when a consumer first sees an offer and generally as prominent as the offer itself.
- Subscription companies must obtain the consumer’s express informed consent before they can be charged for products or services. This includes obtaining the consumer’s acceptance of the negative option feature separately from other portions of the entire transaction, not including information that interferes with, detracts from, contradicts, or otherwise undermines the consumer’s ability to provide their express informed consent.
- Subscription companies must provide easy and simple cancellation procedures for the consumer. Marketers should provide cancellation mechanisms that are at least as easy to use as the method the consumer used to buy the product or service in the first place. For example, if a consumer can subscriber to a digital newspaper online, they should also be able to cancel using the same method, not requiring a phone call or mail-in cancellation form as the only options for cancellation.
Subscription companies with less than transparent business practices, be warned. The FTC is fed up and they aren’t going to take it anymore. They won’t hesitate to prosecute companies like RagingBull.com, ABC Mouse, and MyLife for deceptive business practices. The agency is getting more aggressive in their enforcement, and they won’t tolerate subscription companies that try to trick or trap their subscribers through negative option marketing and hard-to-cancel subscriptions. To stay off the FTC’s radar and to provide subscribers with a positive user experience, subscription companies should follow the FTC’s guidance, be clear and conspicuous in all their communications, get express consent from prospective subscribers, make cancellations and refunds easy, and keep terms and conditions updated.