* 40-year JapaneseGovernment Bonds to be issued in July will be a reopening issue of the May 2024 issue. The auction method is Dutch-style-yield-competitive auction at intervals of 0.5bp.
Kicking off a new CGD series of policy proposals to inform the European Union’s upcoming development agenda, Mikaela Gavas and W. Gyude Moore suggest a reset of the EU’s international relations narrative. Explore their ideas for how the EU can position itself as a global development player while staying true to its values and focusing on the common good.
The same applies to aid flows. The figure below shows data on total aid disbursements from the US depending on who is in power: the solid blue line is Democratic control of the presidency and both branches of Congress, the blue dashed line is Democratic control of the presidency and one or neither branch, the solid red line is Republican control of the presidency and both chambers, and the red dashed line is control of the presidency and one or neither chamber. There’s only one data point for each year, of course, but the lines connect between them. The broad picture strongly suggests the trend matters more than who is in power (indeed, remember the Surprise Party?).
Figure 1: US aid disbursements by party control (Current $m)
The potential good news from this is that despite substantive disagreements over topics including the Mexico City Policy, bipartisan cooperation on aid might still be more possible than it might appear from a close-up perspective in the midst of partisan rancor. To repeat the bad news: much of the recent bipartisan movement on foreign economic policy has been to the detriment of developing countries. And there is certainly some talk of sweeping changes, including cuts, that might mean the past is no guide. But perhaps there still space for elements of a positive agenda around aid for the legislative sessions of next year, one that could appeal to at least some people on both sides of the aisle. Examples might include:
Advancing localization: Spending more US aid finance in recipient countries rather than on US contractors has been a hallmark of Samantha Power’s tenure at USAID. But it has Republican antecedents. The Trump administration followed a localization strategy for PEPFAR that significantly increased the number of local partners and a New Partnerships Initiative at USAID designed in part to do the same. And in 2021, US SenatorsMarco Rubio (R–FL) and Tim Kaine (D–VA) introduced legislation to reduce red tape for local organizations seeking USAID funds. It would be great to see further cooperation on ensuring more development dollars are actually spent in developing countries.
Country focus: All else even somewhat equal, a dollar of foreign assistance simply has a larger impact in poorer countries. The logic that richer countries should be able to look after themselves was a justification for the Trump administration’s “Journey to Self-Reliance”—a philosophy dedicated toward “ending the need for aid.” The Biden administration has continued to produce the “country roadmaps” designed to chart the journey. It would be great to see bipartisan efforts to focus grant resources in particular where they’ll have the greatest impact—in the poorest countries.
Sovereign lending and guarantees: While grants should be focused on poorer countries, loans could be an effective and comparatively low-cost tool to support wealthier countries. The recently passed Ukraineaid package provided resources in the form of partially forgivable loans, and senior Republicans have been pushing the model more widely. More lending and guarantees could be a powerful tool to support infrastructure rollout in middle-income countries. And strengthening the US sovereign loan guarantee program could back development and national security goals at a considerably lower cost than grant-based programs.
MCC reform: The Millennium Challenge Corporation, created during the George W. Bush administration, is running into pipeline challenges—and appropriators have clawed back funding in response. That’s a shame. It is a small but effective aid agency providing resources for development priorities including infrastructure and working with client countries to help them deliver—in fact, it’s a model of successful localization. MCC faces spending challenges in part because it hasn’t increased the size of individual country operations, limits repeat operations, and can only work in countries that pass its “scorecard” of development indicators. The agency wants to address its partner problem by working in richer countries. That’s a sad way to achieve impact and goes against the bipartisan principle that richer developing countries should be weaned off aid flows, not given more. Altering the size of compacts, allowing more repeat compacts, and moving away from a scorecard model towards a model of reward for reform—a specific set of policy changes that need to be completed before funds start flowing—would be a far more effective approach.
Fighting malaria: In the 1958 State of the Union, PresidentEisenhower said that the US would lead a global effort to eradicate malaria. The time and the tools were not right then, but today there is far greater hope for rapid progress against the disease. George Bush created the President’s Malaria Initiative in 2005, and the US has been a vital contributor to the global fight against the parasite since then. With the arrival of new vaccines in the past couple of years, we could accelerate progress and save hundreds of thousands of children’s lives each year. And with better vaccines, we could move even faster. PEPFAR, the US initiative to provide HIV drugs, has transformed the battle against AIDS worldwide. A similar bipartisan initiative could achieve as much with malaria.
Transparency: Both parties have shown commitment to increasing the transparency of aid finance including around subawards and indirect cost rate data. It would be great if there was a bipartisan consensus on simply publishing all aid contracts.
Beyond aid, the African Growth and Opportunity Act was first passed during the Clinton administration, renewed during the Bush administration and then again under the Obama administration. A bipartisan proposal to renew the trade package once more was launched in the Senate in April this year. Perhaps AGOA could be made even bigger and better. Even amidst partisan rancor, there is plenty a Congress and administration could do to improve US relations with and support to low- and middle-income countries next year.
Undoing Gender Inequality Traps in the Financial Sector: The Case of Colombia
by Mayra Buvinic and Alba Loureiro, July 9, 2024 (CGD Blog Post)
Gender data is needed to gauge the extent to which financial services include and benefit women. However, sex-disaggregated data that tracks access to and use of financial services is still hard to come by, and it is especially rare to have country-level data that captures the universe of financial sector providers (FSPs) and is published on a regular basis.
A notable exception is Colombia, where Banca de Oportunidades (BdO), a public sector technical assistance and advocacy platform, compiles in a centralized data platform anonymized data from all FSPs in partnership with Colombia’s Superintendency of Banks. The 2023 edition, the 13th annual publication, reports on 15 million transactions, 60 percent of them monetary, from the universe of banks, credit and savings cooperatives, microfinance institutions, and fintechs. The report tells a sobering story worth highlighting of the trajectory of women’s financial inclusion because it mirrors much of what we know [archived PDF] about the constraints women face having access to financial services in low- and middle-income countries. The report’s numbers [archived PDF] suggest that:
Expanding access is not enough
Despite almost universal access to financial products, gender gaps persist. In 2023, 19 out of every 20 adult Colombians (or 94.6 percent) reported access to at least one financial product or service. However, women faced less favorable conditions (see below), underscoring that mere access is insufficient.
Gender gaps are evident in both savings and credit
In 2023, women had 6.5 and 3.7 percentage points (pp) lower access to savings and credit, respectively, than men. While women’s access to savings increased over time–from 75 percent in 2018 to 90.4 percent in 2023–the gender gap widened (from 4.3 pp to 6.5 pp). In the same period, the gender gap in credit narrowed slightly (from 4.8 pp to 3.7 pp) but both men’s and women’s access to credit decreased–for women from 37.7 percent in 2018 to 33.4 percent in 2023.
Women face access to credit in less favorable conditions than men
Interest rates are higher for women clients across all loan types, and highest for microcredit–with a 5.4 percent gender gap–which women access more than men. In 2023, women accessed 1,029 million and men accessed 857,000 microcredit loans. More men than women accessed commercial loans (20,000 versus 14,000 loans) while housing loans went equally to women and men.
Paradoxically, these less favorable conditions coexist with women exhibiting lower credit risks than men
Women have better repayment rates than men across loan types (Figure 1). Women also perform better across insurance products, except for microinsurance, showing lower accident rates. However, female clients have 13.8 pp lower access to insurance products than men.
Figure 1: Total Repayment Rates, Overdue More Than 30 Days.
Source: The graphic was extracted from the Financial Inclusion PowerPoint (Paola Arias and Jaime Rodriguez, 4 June, 2024) [archived PDF], and the labels were translated from Spanish.
The data implies that women’s good financial behavior is penalized rather than prized, with higher interest rates and lower access to financial products
Rationing credit and other financial services to women perpetuates ‘gender inequality traps’ leading to further rationing
It all starts with women having fewer assets to use as collateral and lower earnings than men (a commonplace fact across financial markets everywhere) which leads them to qualify for smaller loans. In turn, this results in women having less access to credit to increase earnings because of the high costs to lenders of serving customers with small loans, resulting in even lower earnings.
Gender biases that affect the supply and demand for credit reinforce this vicious cycle
On the supply side, there are cognitive and perceptual biases (the latter detected by eye-tracking) from financial sector providers–male potential borrowers are ‘ex-ante’ perceived as having higher earnings than similar women. And female bank agents are stricter at evaluating female clients than male clients.
On the demand side, the incorrect assumption that women are higher credit risks than men is reinforced by female clients’ own lower self-confidence and greater self-exclusion from financial services: women do not apply for credit because they anticipate they will be rejected because they have lower earnings.
Not surprisingly perhaps, women in Colombia score lower than men in a financial health indicator–with an average score of 4.9 for women and 5.6 for men measured in a 0 to10 scale (scored by BdO using data from the 2022 edition of the survey).
To overcome these gender inequality traps, only a combination of strategies will work
Solutions must address both demand– and supply-side constraints and include:
Increase women’s self-confidence and combat their self-exclusion from financial services with credit ‘plus’ interventions that include ‘soft skills’ training.
Provide customized products that fit women’s needs, including importantly insurance and microinsurance that respond to women’s greater need for mitigating (family) risks.
Combat supply-side biases that lead to inefficiencies and exclusions, including incentives to financial sector providers to reach women with financial services.
For the above, collect and publish gender data, but data that does not end up sitting on a shelf gathering dust; data that instead is used to make management decisions, which underscores the role of public sector institutions such as BdO in collaborating with and incentivizing financial sector providers, and in measuring, tracking, and reporting progress in financial inclusion.
Fortunately, there is a growing wealth of research that backs up the solutions suggested above. But there is still an important practical research agenda ahead:
First is reaching the poorest and excluded with financial services that they may need. In the case of Colombia, this includes indigenous and Afro-descendent populations in geographically distant regions of the country. This requires building further granularity in the financial inclusion data, following guidelines of intersectionality data in development.
There is substantial research on demand-side constraints in women’s access to financial services. There is comparatively little research on supply-side gender biases and solutions to these biases that can be scaled.
Lastly, there is the task of developing financial health indicators that can be easily and widely used disaggregated by gender and other demographic features to monitor an important development outcome from increasing financial access to all.
Disclaimer
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
“Globalization” is here. Signified by an increasingly close economic interconnection that has led to profound political and social change worldwide, the process seems irreversible. In this book, however, Harold James provides a sobering historical perspective, exploring the circumstances in which the globally integrated world of an earlier era broke down under the pressure of unexpected events.
James examines one of the great historical nightmares of the twentieth century: the collapse of globalism in the Great Depression. Analyzing this collapse in terms of three main components of global economics—capital flows, trade and international migration—James argues that it was not simply a consequence of the strains of World War I, but resulted from the interplay of resentments against all these elements of mobility, as well as from the policies and institutions designed to assuage the threats of globalism.
Could it happen again? There are significant parallels today: highly integrated systems are inherently vulnerable to collapse, and world financial markets are vulnerable and unstable.
While James does not foresee another Great Depression, his book provides a cautionary tale in which institutions meant to save the world from the consequences of globalization—think WTO and IMF, in our own time—ended by destroying both prosperity and peace.
PresidentTrump’s speech here at the World Economic Forum went over relatively well. That’s partly because Davos is a conclave of business executives, and they like Trump’s pro-business message. But mostly, the president’s reception was a testament to the fact that he and what he represents are no longer unusual or exceptional. Look around the world and you will see: Trump and Trumpism have become normalized.
Davos was once the place where countries clamored to demonstrate their commitment to opening up their economies and societies. After all, these forces were producing global growth and lifting hundreds of millions out of poverty. Every year, a different nation would become the star of the forum, usually with a celebrated finance minister who was seen as the architect of a boom. The United States was the most energetic promoter of these twin ideas of economic openness and political freedom.
Today, Davos feels very different. Despite the fact that, throughout the world, growth remains solid and countries are moving ahead, the tenor of the times has changed. Where globalization was once the main topic, today it is the populist backlash to it. Where once there was a firm conviction about the way of the future, today there is uncertainty and unease.
This is not simply atmospherics and rhetoric. Ruchir Sharma of Morgan Stanley Investment Management points out that since 2008, we have entered a phase of “deglobalization.” Global trade, which rose almost uninterruptedly since the 1970s, has stagnated, while capital flows have fallen. Net migration flows from poor countries to rich ones have also dropped. In 2018, net migration to the United States hit its lowest point in a decade.
It’s important not to exaggerate the backlash to globalization.
As a 2019 report by DHL demonstrates, globalization is still strong and, by some measures, continues to expand. People still want to trade, travel and transact across the world. But in government policy, where economic logic once trumped politics, today it is often the reverse. EconomistNouriel Roubini argues that the cumulative result of all these measures — protecting local industries, subsidizing national champions, restricting immigration — is to sap growth. “It means slower growth, fewer jobs, less efficient economies,” he told me recently. We’ve seen it happen many times in the past, not least in India, which suffered decades of stagnation as a result of protectionist policies, and we will see the impact in years to come.
This phase of deglobalization is being steered from the top. The world’s leading nations are, as always, the agenda-setters. The example of China, which has shielded some of its markets and still grown rapidly, has made a deep impression on much of the world. Probably deeper still is the example of the planet’s greatest champion of liberty and openness, the United States, which now has a president who calls for managed trade, more limited immigration and protectionist measures. At Davos, Trump invited every nation to follow his example. More and more are complying.
Students should sense that while history does not repeat itself, it sometimes rhymes and this is a major danger. It also might imply that coping with climate change will be all the harder because American-led unilateralism everywhere would mean world policy paralysis.
However, non-mining business investment in Australia was fairly weak over much of the 2010s, despite declines in interest rates and moderate economic growth. While several explanations have been put forward, one potential explanation is that monetary policy is not very effective at stimulating business investment or has become less effective over time.
We provide new evidence on the effect of monetary policy on investment in Australia using firm-level data. We find that contractionary monetary policy makes firms less likely to invest and lowers the amount they invest if they do so. The effects are similar for young and old firms, indicating that the decline in the number of young firms in Australia over time is unlikely to have weakened the effect of monetary policy. The effects are also broadly similar for smaller and larger firms. This suggests that evidence that some, particularly large, firms have sticky hurdle rates does not mean that they do not respond to monetary policy. It also suggests that overseas findings that expansionary monetary policy lessens competition by supporting the largest firms likely do not apply to Australia. We find evidence that financially constrained firms, and sectors that are more dependent on external finance, are more responsive to monetary policy, highlighting the important role of cash flow and financing constraints in the transmission of monetary policy. Finally, we find evidence that monetary policy affects firms’ actual and expected investment contemporaneously, suggesting that expectations are reactive and will tend to lag over the cycle.
The Federal Trade Commission is sending more than $3 million in refunds to businesses that paid for memberships to HomeAdvisor, Inc., a company affiliated with Angi (formerly known as Angie’s List). The agency is also sending claim forms to businesses that are eligible for additional refunds.
The refunds stem from FTC allegations that HomeAdvisor used deceptive marketing tactics when selling home improvement project leads to service providers, including small businesses operating in the “gig” economy. The FTC’s March 2022 complaint alleged that since at least mid-2014, HomeAdvisor made false, misleading, or unsubstantiated claims about the quality and source of the leads it was selling to home service providers in search of potential customers. The agency also charged that HomeAdvisor told businesses that their annual membership would include one free month of mHelpDesk, an optional scheduling and payment processing service marketed by HomeAdvisor, but in reality, the company charged an additional $59.99 for the first month.
The FTC is sending 110,372 checks to eligible home service providers. These refunds are related to the FTC’s allegations that HomeAdvisor misled businesses about the quality of customer leads they would get with their membership. Recipients should cash their checks within 90 days, as indicated on the check.
The agency is also sending 91,273 claims forms to businesses that paid for mHelpDesk. The deadline to submit a claim is February 26, 2024. More information about the refund process is available at ftc.gov/HomeAdvisor or by calling the refund administrator, Rust Consulting, Inc., at 1-833-915-1144. The Commission never requires people to pay money or provide account information to get a refund.
This paper seeks to estimate the extent to which market-implied policy expectations could be improved with further information disclosure from the FOMC. Using text analysis methods based on large language models, we show that if FOMC meeting materials with five-year lagged release dates—like meeting transcripts and Tealbooks—were accessible to the public in real-time, marketpolicy expectations could substantially improve forecasting accuracy. Most of this improvement occurs during easing cycles. For instance, at the six-month forecasting horizon, the market could have predicted as much as 125 basis points of additional easing during the 2001 and 2008 recessions, equivalent to a 40-50 percent reduction in mean squared error. This potential forecasting improvement appears to be related to incomplete information about the Fed’s reaction function, particularly with respect to financial stability concerns in 2008. In contrast, having enhanced access to meeting materials would not have improved the market’s policy rate forecasting during tightening cycles.
Container shipping companies’ 3Q23 financial results showcased a sharp dip in profits or even losses. On a group level, eleven liners (which report quarterly results) among our portfolio of 13 companies reported an average slump of 54.6% YoY in their 3Q23 topline. Operating costs declined 18.1% YoY amid falling chartering costs and lowering bunker prices. However, the cost reduction was insufficient to offset the plunge in topline; thus, EBIT contracted 94.1% YoY on average.
The Drewry Container Equity Index tumbled 28.1% YTD 2023 (ending 22 November), driven by lowering freight rates (WCI: -30.7% in YTD 2023), which squeezed earnings over the quarters. On the contrary, the S&P 500 posted an 18.4% growth. The Drewry Container Equity Index declined 3.4% in the month ending 22 November 2023. Talking about equity prices individually, APMM’s stock price fell 9.0% amid EBIT loss for its Ocean segment in 3Q23, staff cuts and reduced capex guidance, highlighting APMM’s efforts toward reducing costs faced with the bleak industry outlook. Hapag-Lloyd’s stock price slumped 22.2% as its EBIT margin (3Q23: 5.1%) slid below its pre-pandemic level (3Q19: 7.8%). ZIM became the first carrier to report impairment of assets worth USD 2.0bn in 3Q23, and its stock price fell 18.1%. Meanwhile, China-exposed container companies benefitted from the positive sentiment arising from the proposed fiscal stimulus by the Chinese government, possibly boosting the out-of-China and intra-Asia trades. Asianstocks in the broader index rose 2.0% to 19.4% in the month ending 22 November 2023.
Mainly driven by weak earnings prospects, the Drewry Container Equity Index trades at a P/B of 0.5x, a 47.5% discount to its pre-pandemic average (2013-19). We expect freight rates to fall sharply in 2024 and increasingly incur losses. Thus, we expect the multiple to remain suppressed.
As the fleet of container shipping companies expands, the charter market softens. For instance, 1-year TC rates declined 14.2% and 52.5% YoY in October for vessels sized 1,110 teu and 8,500 teu. Rates declined more for larger vessels as these constitute the majority of the order book and new deliveries. The YoY decline has continued since October 2022, but rates improved slightly during April-May 2023. However, this was not due to the fundamentally strong market but MSC and CMA CGM’s aggressive chartering of vessels to expand their fleets. Now that the two companies have stopped chartering in vessels, the charter market continues to decline.
Driven by the softening charter market, second-hand asset prices are also weakening. In October, on a YoY basis, prices for five-year-old vessels (2,700 teu and 7,200 teu) contracted 30.6% and 31.5%, and for 10-year-old ships, prices tumbled between 36.7% and 53.2%. Contrary to the sale and purchase market, newbuild prices (1,500 teu and 14,000 teu) continue to increase and rose by an average of 2.2% YoY, led by a shortage of capacity in shipyards.
In October, I wrote about the potential for standards to make business-to-business payments more efficient. Today, let’s talk about standards again, this time for money transfer businesses and the state regulations covering them.
For new and established money transfer businesses and for state regulators, the hodgepodge of state regulations creates headaches. To do business everywhere in the United States, money transfer businesses must register separately in each state and US territory and meet license requirements that can vary from state to state. They can face multiple state examinations, also with different requirements, simultaneously (and annually). During examinations, regulators review operations, financial condition, management, and compliance with anti-money laundering laws.
Fortunately, many states have acted to address this confusing and inefficient situation by adopting the Model Money Transmission Modernization Act (MTMA) [archived PDF], sample legislation developed by the Conference of State Bank Supervisors to establish nationwide standards and requirements for licensed money transmitters. Fourteen states have adopted some version of the MTMA: Arizona, Arkansas, Georgia, Hawaii, Indiana, Iowa, Minnesota, Nevada, New Hampshire, North Dakota, South Dakota, Tennessee, Texas, and West Virginia. In my home state of Massachusetts, the legislature’s Joint Committee on Financial Services heard testimony on a version of this bill just last month. For traditional money transmitters and new fintech entrants, the MTMA aims to reduce the substantive and technical differences among the various state laws and regulations. This kind of change has the potential to reduce compliance burdens, encourage innovation, and remove barriers to entry for new market participants.
The MTMA is important given the prodigious growth in person-to-person, or P2P, payments via apps. Among all USconsumers, half of P2P payments were sent using noncash methods in 2022, up from less than 30 percent in 2020 (see the chart). From Massachusetts alone, money transmitters sent $31 billion in 2022, according to the state’s Division of Banks.
Half of P2P payments were made electronically in 2022.
The MTMA also has the potential to create efficiencies for state supervisors. For example, the Conference of State Bank Supervisors (CSBS) has facilitated a collaborative exam program for nationwide payments and cryptocurrency firms to undergo one exam, each facilitated by one state overseeing a group of examiners sourced from across the country. According to the CSBS, transmitters in more than 40 states that have laws addressing core precepts can benefit from the streamlined exams.
The MTMA is another example showing that standards create efficiencies that are good for businesses, good for regulators and, by extension, good for consumers.
The slower momentum is concerning because, as we show in a new staff discussion note, green innovation is not only good for containing climate change, but for stimulating economic growth too. As the world confronts one of the weakest five-year growth outlooks in more than three decades, those dual benefits are particularly appealing. They ease concerns about the costs of pursuing more ambitious climate plans. And when countries act jointly on climate, we can speed up low-carbon innovation and its transfer to emerging markets and developing economies.
IMF research [archived PDF] shows that doubling green patent filings can boost gross domestic product by 1.7 percent after five years compared with a baseline scenario. And that’s under our most conservative estimate—other estimates show up to four times the effect.
A key question is how countries can better foster green innovation and its deployment. We highlight how domestic and global climate policies spur green innovation. For example, a big increase in the number of climate policies tends to boost green patent filings, our preferred proxy for green innovation, by 10 percent within five years.
One reason policy synchronization has a prominent impact on domestic green innovation is what is called the market size effect. There’s more incentive to develop low-carbon technologies if innovators can expect to sell into a much larger potential market, that is, in countries which adopted similar climate policies.
Another is that climate policies in other countries generate green innovations and knowledge that can be used in the domestic economy. This is known as technology diffusion. Finally, synchronized policy action and international climate commitments create more certainty around domestic climate policies, as they boost people’s confidence in governments’ commitment to addressing climate change.
The risks of protectionism are exacerbated when climate policies, such as subsidies, do not abide by international rules. For example, local content requirements, whereby only locally produced green goods benefit from subsidies, undermine trust in multilateral trade rules and could result in retaliatory measures.
Complaint alleges company violated FTC Act and ROSCA with false promises targeting consumers living paycheck-to-paycheck and by failing to deliver cash advances as advertised
The Federal Trade Commission is taking action against personal financeapp provider Brigit, alleging that its promises of “instant” cash advances of up to $250 for people living paycheck-to-paycheck were deceptive and that the company locked consumers into a $9.99 monthly membership they couldn’t cancel.
Brigit, also known as Bridge It, Inc., has agreed to settle the FTC’s charges, resulting in a proposed court order that would require the company to pay $18 million in consumer refunds, stop its deceptive marketing promises, and end tactics that prevented customers from cancelling.
“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 FTC’s complaint, however, charges that consumers were rarely able to get an advance for the promised $250, and in many cases, consumers were not able to receive a cash advance at all. Despite Brigit’s promises that advances would be available with “free instant transfers,” the complaint notes that the company began charging consumers a 99-cent fee for an instant transfer. Consumers who did not pay the fee had to wait up to three business days for their advances.
In addition, the complaint charges that while Brigit claimed to offer “non-recourse” advances with no fees or interest, the company prevented consumers who had an open advance from cancelling their subscription and continued to withdraw $9.99 monthly from their bank account until the advance was paid off. Such monthly charges created significant additional hardship for consumers already struggling to pay off a cash advance.
Even when consumers without an open cash advance attempted to cancel the paid subscription, the complaint charges that the company employed dark patterns—manipulative design tricks—to create a confusing and misleading cancellation process that prevented consumers from cancelling their subscriptions, instead of offering a simple mechanism to cancel, as required by the Restore Online Shoppers’ Confidence Act (ROSCA) [archived PDF].
The proposed settlement order [archived PDF], which must be approved by a federal judge before it can go into effect, would require Brigit to pay $18 million to the FTC to be used to provide refunds to consumers. In addition, the order would prohibit Brigit from misleading consumers about how much money is available through their advances, how fast the money would be available, any fees associated with delivery, and consumers’ ability to cancel their service. The order would also require the company to make clear disclosures about its subscription products and provide a simple mechanism for consumers to cancel.
