In this blog post, I will evaluate Cerebeal’s deceptive cancellation practices and its long-term impact on the business. I’m going to focus on mobile marketing laws that were violated and how they affect consumers. Additionally, legal penalties for the specific marketing laws Cerebeal broke will be addressed. Finally, I will address potential actions the marketing team should consider if they want to remain ethical.

Mobile Marketing Law Violations

Cerebeal is subject to Section 5 of the Federal Trade Commission Act, which prevents marketers from engaging in unfair business practices to attract customers. “Section 5 of the Federal Trade Commission Act (FTC Act) (15 USC 45) prohibits ‘unfair or deceptive acts or practices in or affecting commerce.’ The prohibition applies to all persons engaged in commerce, including banks”. Since Cerebeal promised customers refunds at any time, it has a legal obligation under the Federal Trade Commission to credit customers. Since Cerebeal decided to complicate the subscription cancellation process, they broke their legal promise for consumers to ‘cancel anytime’.

The Restore Online Shoppers’ Confidence Act also affects Cerebeal, which holds businesses accountable for sharing accurate information with online customers. “To continue its development as a marketplace, the Internet must provide consumers with clear, accurate information and allow sellers to fairly compete with one another for consumers’ business” (Authenticated U.S. Government Information, 2010). Since Cerebeal didn’t provide honest information about their services through online advertisement, they were in violation of the Restore Online Shoppers’ Confidence Act.

Lastly, Cerebeal was in violation of HIPAA because it operates as a healthcare business. Cerebeal sold consumers’ healthcare information without their consent. According to Vcomply (n.d.), “HIPAA prohibits the sale of PHI without patient consent. If a healthcare provider, insurer, or any organization shares or sells PHI without the patient’s authorization, they could face heavy fines and penalties”. Violating HIPAA as a mobile marketer can hurt your margins and reputation in the future.

Consumer Consequences

Consumers who can’t cancel a subscription might face financial hardships because cost concerns are one of the main reasons for subscription cancellations. According to Daphne Tideman (2025), “Cost concerns are the second most significant reason for churn at 34.64%”. Since Cerebeal made cancelling subscriptions a complicated and multi-day process, consumers might be forced to pay for the service. As a personal example, I had to shut down my bank account to cancel a gym subscription because I moved during the pandemic. Gold’s Gym wanted me to fill out a form at a specific location, which was inconvenient because it was about 2 hours away.

Exposure to spammers can occur if a business sells personal data without consent. In many cases, bad actors buy third-party data with the intention of spamming or stealing personal information. This allows stalkers and scammers to collect personal information (health issues, finances, personal occupation, etc.) that can be used maliciously. It can be difficult for businesses to verify the credibility of third-party buyers because of a lack of transparency and unclear global regulations.

Potential Legal Consequences for Mobile Marketers

On the less severe side, mobile marketers could receive a cease and desist order. This will allow the business to remove an ad before any legal actions take place. However, future marketing campaigns that engage in deceptive practices will be charged hefty fines on a daily basis.

Companies might be required to pay civil penalties. Many companies had to pay consumers with checks or discounts for false advertisements. According to Federal Trade Commission (2025), “An independent refund administrator, Epiq Systems, is sending payments totaling more than $5 million to 40,249 affected consumers. Most of these consumers will receive a check in the mail, which they should cash within 90 days, as indicated on the check”.

In some extreme cases, mobile marketers can be charged with criminal convictions for deceptive marketing practices. Making ads with a proven intent to take advantage of consumers or cause harm can lead to jail time and heavy fines.

Ethical Practices for Mobile Marketers

Mobile marketers should inform consumers how their data will be used. Informing consumers on how data is being used can increase consumer trust and can help businesses avoid legal allegations. Consumers should also be able to opt out of having some or all of their data shared with third parties.

Additionally, mobile marketers should consider adding disclaimers that are easy to comprehend in their mobile marketing campaigns. This protects businesses from being held legally liable for certain claims made in a marketing strategy. For example, I have a disclaimer at the end of this blog that explains my intentions and expertise, which protects me from future liabilities.

Finally, marketers should improve the UX experience of their websites and advertisements. Ensuring that consumers can easily navigate a website can lead to increased trust and credibility. A marketer who allows consumers to have smooth transitions and doesn’t add obstacles to cancel services can build consumer trust and reduce legal accusations.

Alternative Cancellation Methods

On a final note, ethical marketing can make consumer relationships easier to predict. Consumers are known for finding alternative routes to cancel subscriptions if it becomes too complicated or inconvenient. The alternative route to cancelling a subscription can lead to worse long-term outcomes for marketers.

In many cases, consumers will just call their bank to cancel a charge. According to Tom-Chris Emewulu (2025), “U.S. merchants are bearing the brunt. They’re shouldering an excessive 10% of the total global chargeback volume. By 2026, U.S. chargeback volume is estimated to reach 146 million at a value of $15.3 billion”. A customer having to resort to contacting the bank does more business harm than if they cancelled a subscription with a business, because it builds frustration and makes them less likely to conduct business in the future.

Interestingly, another method that’s becoming more common is swapping the primary payment methods for an alternative one that doesn’t have sufficient funding. Marketers who make it complicated for customers to cancel subscriptions might see failed transactions during the next billing cycle.

In the end, forcing consumers to pay for subscriptions they don’t want and not respecting their digital rights is a lose-lose situation. Consumers are more likely to be harassed by spammers and face financial losses when businesses don’t respect their rights. Additionally, there are several methods customers can use to cancel subscriptions if businesses make it difficult. Alternative cancellation methods are unpredictable and hard to measure, which can damage relationships with stakeholders.

Disclaimer: Keep in mind that nothing in this blog is legal advice. I’m not a legal professional, and my knowledge of business and marketing law is limited. My intention for this article is to gain a competitive advantage in marketing careers and to meet the requirements for Mobile Marketing (MKT311) at Southern New Hampshire University.

References

Authenticated U.S. Government Information (2010). Restore Online Shoppers’ Confidence Act. Congressional Records. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.congress.gov/111/plaws/publ345/PLAW-111publ345.pdf

Emewulu, Tom-Chris (2025). The Ultimate Chargeback Statistics 2025: Trends, Costs, and Solutions. Charge Flow. https://www.chargeflow.io/blog/chargeback-statistics-trends-costs-solutions#:~:text=Global%20chargeback%20volume%20is%20predicted,of%20chargebacks%20stemming%20from%20fraud.

Federal Trade Commission (n.d.). Federal Trade Commission Act. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.federalreserve.gov/boarddocs/supmanual/cch/200806/ftca.pdf

Federal Trade Commission (2025). More Than $5 Million in Refunds Sent to Consumers as a Result of the FTC’s Action Against Cerebral Over Deceptive Cancellation Practices. https://www.ftc.gov/news-events/news/press-releases/2025/05/more-5-million-refunds-sent-consumers-result-ftcs-action-against-cerebral-over-deceptive

Tideman, Daphne (2025). Churn in Subscription Apps: Top 5 Cancelation Reasons (and What to Do About Them). Revenue Cat. https://www.revenuecat.com/blog/growth/subscription-app-churn-reasons-how-to-fix/#1-insufficient-usage

U.S. Department of Health and Human Services (n.d.). Summary of the HIPAA Privacy Rule. https://www.hhs.gov/hipaa/for-professionals/privacy/laws-regulations/index.html

Vcomply (n.d.). Sale of Protected Health Information (PHI) Policy. https://www.v-comply.com/sale-of-protected-health-information-phi-policy-template/#:~:text=HIPAA%20prohibits%20the%20sale%20of,face%20heavy%20fines%20and%20penalties.