23 States Call on Feds to End Deceptive Marketing Practices
New York – Ever get an offer with a 14-day free trial period and then find that you locked yourself into a long-term contract
A group of 23 attorneys general from around the nation issued a letter Tuesday urging the federal government to ban the practice known as “negative option marketing.”
“Deceptive marketing hurts us all,” New York Attorney General Letitia James, one of the co-signees, said in a statement.
With negative option marketing, a marketer makes an offer, with the consumer’s failure to take action in response to that offer deemed acceptance of the offer.
One especially common example of this deceptive practice involves a so-called “free” trial, where consumers are offered a free trial period of a product or service. To receive the free trial, consumers are required to submit their credit card number. However, the free trial has additional terms and conditions — which are not clearly or conspicuously disclosed to the consumer — stating that unless consumers cancel the goods or services they are agreeing to continue to receive and pay for them.
The letter by the 23 top law enforcement officials urges the Federal Trade Commission to require companies to remind consumers before their free trials come to an end.
The current regulations, adopted in 1973, only regulate only one type of negative option marketing — where a marketer delivers merchandise and the consumer must pay unless they decline within a set time frame. This is common among book-of-the-month clubs.
In their letter, the coalition of attorneys general recommends that the FTC expand its regulations to require customers to consent to any trial offer — and that sellers should have to obtain a separate consent to charge for goods or services after the trial period has ended. They also want to compel sellers to send regular notifications to consumers enrolled in negative option plans that disclose the timing, amount, and method by which they are billed, and that provides the consumer with a convenient method to cancel the goods or services.
The letter also requests that companies allow consumers to cancel their memberships using the same method they used to enroll in a program. And consumers who are unwittingly enrolled in negative option plans should be entitled to a refund from the date the free trial ended.
The attorneys general of the states of New York and Pennsylvania drafted the letter, which has the support of the attorneys general of 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.
“The states are on the front line in combatting deceptive and unfair negative option plans that can take any number of forms,” read the letter, which is addressed to FTC Secretary April Tabor. “Often these plans ultimately leave consumers confused, misled and out of pocket significant sums of money. … The states strongly urge the Commission to take additional steps to enhance consumer protections in this area, particularly concerning trial conversions.”
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