Banking and Finance Law Daily Wrap Up, ENFORCEMENT ACTIONS—E.D. Tex.: Court denies dismissal of ACTIVE Network dark patterns suit in succinct opinion, (Oct 9, 2024)

By Justin Marcus Smith, J.D.

The CFPB can continue to pursue its allegations that ACTIVE Network illegally charged hundreds of millions of dollars in “junk” enrollment fees by means of “digital dark patterns and online trickery.”

The Consumer Financial Protection Bureau stated plausible claims for relief against ACTIVE Network, an online platform, sufficient to defeat a motion to dismiss for failure to state a claim, held a federal district court in Sherman, Texas. The court entered a three-page opinion containing a single-sentence of analysis. The court did not elaborate or provide a background explanation for its finding that the CFPB could proceed with its first amended complaint (Consumer Financial Protection Bureau v. Active Network, LLC, No. 4:22-cv-00898-ALM (E.D. Tex. Oct. 7, 2024)).

In October 2022, the CFPB sued ACTIVE Network for illegally charging hundreds of millions of dollars in enrollment fees. In an announcement, the CFPB described ACTIVE Network as a payment platform that families throughout the U.S. use to sign up for community activities, for example, charity runs.

The CFPB’s amended complaint alleged that ACTIVE Network violated the Consumer Financial Protection Act (CFPA) by driving up enrollments by using sophisticated online design techniques, often called “dark patterns,” to cause families to enroll in memberships they did not want (see Banking and Finance Law Daily, Oct. 19, 2022). “Dark patterns” are typically thought of as hidden tricks or trapdoors that companies build into their websites to get consumers to inadvertently click links, sign up for subscriptions, or purchase products or services. In a press release about the ACTIVE Network complaint, CFPB Director Rohit Chopra said, “People who thought they were just signing up to run in a charity race found out too late that the company was running away with their money.”

ACTIVE Network filed its motion to dismiss on June 17, 2024, and the CFPB filed opposition on July 15. Further motion practice over the summer culminated with ACTIVE Network’s filing, or attempted filing, of a sur-sur-reply on the CFPB motion to dismiss; however, the court did not address the unusual flurry of motion responses.

Junk fees. As previously reported, a separate statement by CFPB Director Rohit Chopra emphasized that the lawsuit illustrates several areas of focus for the CFPB: (1) the employment by financial services firms of digital dark patterns; (2) reduction of unwanted junk fees; and (3) a safe and fair payments system that allows Americans to make payments seamlessly and know how much they are transferring and to whom.

State settlements. In separate actions, Iowa and Vermont sanctioned ACTIVE Network for violating state consumer financial protection laws, but the settlements only applied to ACTIVE Network conduct in those individual states.

The case is No. 4:22-cv-00898-ALM.

Judge: Mazzant, A.

Attorneys: Christopher Jackson for the CFPB. Clayton Edward Bailey (Bailey Brauer PLLC) for Active Network, LLC.

Companies: Active Network, LLC

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