Twenty-three attorneys general urged the Federal Trade Commission Tuesday to adopt regulations to prevent consumers from being tricked by negative option marketing schemes. In a letter to the agency, they argue that the FTC should use its rulemaking authority to expand existing regulations.
“We’re urging the FTC to take action and use its power to protect consumers from the harm of predatory marketers,” said New York Attorney General Letitia James.
With negative option marketing, a marketer makes an offer and the consumers’ silence or failure to respond is considered acceptance.
One problem type is a “free” trial, where consumers are offered a free trial period for a product or service. To get it, consumers need to submit their credit or debit card number. However, the free trial has additional terms – which aren’t clearly disclosed – stating that if consumers don’t cancel they’re agreeing to continue to receive items and pay for them. Companies aren’t required to remind consumers before their free trials end, which can result in consumers being charged automatically when they end.
The current regulations were adopted in 1973 and apply to only one type of negative option marketing – the delivery of items where consumers receive periodic announcements that items will be delivered unless they’re decline within a time frame, for example, book-of-the-month clubs.
In their letter, the attorneys general recommend that the FTC expand its regulations to include:
- Informed consent: Sellers need to obtain a separate consent to charge for goods or services after the trial period ends.
- Periodic notices: Sellers need to send regular notices to consumers enrolled in negative option plans that disclose the timing, amount, and method by which the seller bills the consumer for the renewal, and that provides the consumer with a convenient method to cancel the items.
- Simple cancellation processes: Consumers should be allowed to cancel their memberships using the same method they used to enroll in a program.
- Refunds: Consumers who were unaware that they enrolled in negative option plans should be able to get a refund from the date the free trial ended.
James reminds consumers to be careful submitting billing information to a marketer online, by phone, or in other ways. Consumers should review the details of any offer – including the fine print – which may contain important details of an offer.
In addition to New York, Pennsylvania, Colorado, Delaware, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, North Dakota, Oregon, Rhode Island, Vermont, Virginia, Washington, Wisconsin, and the District of Columbia signed the letter to the FTC.