Shares of Hims & Hers fell about 10% on Wednesday as investors sold off after the U.S. Federal Trade Commission filed a lawsuit alleging the telehealth firm misled customers about privacy, billing and subscription cancellations. The complaint was lodged in federal court on July 29 and was joined by Los Angeles County and the state of Utah. The filing escalates an investigation that began in October 2023 and follows the company's May disclosure of a $15 million probable-loss accrual. The move sharpens scrutiny of how online health platforms handle sensitive medical data and recurring payments.

In the Northern District of California on July 29 regulators lodged a formal complaint against Hims & Hers, turning an investigation into litigation. The filing says the company shared users’ sensitive health details with online advertising platforms and that it misrepresented how private customer information would remain. The suit also alleges billing practices that charged customers before clinician consultations and subscription cancellation flows designed to trigger automatic refills. This FTC framed the action as consumer protection enforcement, and it was joined by Los Angeles County and the state of Utah.

What exactly did the FTC allege?

The complaint says Hims & Hers used tracking technologies on its website to pass sensitive health information to advertising platforms, naming Meta Platforms and Snap. Regulators said data transfers could reveal conditions such as erectile dysfunction, premature ejaculation and hair loss, even though consumers were told their care and data were private. The filing also accuses the company of charging customers for prescriptions after intake forms rather than after consultations with clinicians, and of making cancellations difficult by hiding cancellation controls and imposing tight cutoffs to avoid automatic refills. The legal claims include violations of the FTC Act and the Restore Online Shoppers’ Confidence Act.

How did Hims & Hers respond?

Hims & Hers posted on X that the lawsuit "disregards substantial evidence" the company provided during a nearly three-year probe and "contorts the law to try to manufacture claims." The company said it's confident in its position and will vigorously defend itself. That response follows an earlier settlement offer the company made without admitting wrongdoing, and the firm has already recorded a $15 million probable-loss accrual tied to the inquiry. Investors reacted to the filing and the company’s expanding product mix, including weight-loss medications and other prescriptions, with a rapid sell-off in the stock.

Shares tumbled roughly 10% on Wednesday as orders to sell piled up, a move that hit shareholders and rattled other firms in the telehealth sector. The brief but sharp share decline compounded existing volatility around the company as it broadened into new prescription treatments. Beyond equity investors, the complaint targets consumers who use subscription telehealth services because the alleged data flows and billing model touch both privacy and payment consent. Regulators cited examples of customers reporting charges before speaking with a clinician and automatic refills processed earlier than advertised, which can convert one-off purchases into recurring charges.

The FTC’s probe began in October 2023 and the agency formally communicated its findings to Hims & Hers in April, after which settlement talks started. In May the company recorded a $15 million probable-loss accrual related to the matter and warned any final cost could be materially higher. The complaint filed on July 29 escalated negotiations into litigation by adding formal claims about data sharing, billing before consultations and cancellation practices. Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection, said the agency would act on behalf of consumers deprived of the ability to choose whether to keep their most sensitive health information private.

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The complaint was filed July 29, and Hims & Hers disclosed publicly in May a $15 million probable-loss accrual, while warning any final cost could be materially higher.

This article was created with AI assistance.