ATTORNEY GENERAL RAOUL URGES FEDERAL TRADE COMMISSION TO TAKE ACTION AGAINST DECEPTIVE MARKETING PRACTICES

Chicago — Attorney General Kwame Raoul, along with a coalition of 22 attorneys general, today urged the Federal Trade Commission (FTC) to adopt regulations to prevent consumers from being deceived by negative option marketing schemes. Raoul and the coalition issued a letter to the FTC, which is considering whether to use its rulemaking authority to expand existing negative option regulations.

“Negative option marketing schemes mislead consumers and often unfairly lock them into recurring payments that cause them to unknowingly lose large sums of money,” Raoul said. “I urge the FTC to take action and adopt additional regulations to protect consumers from these deceptive marketing practices.”

Negative option marketing involves a consumer receiving an offer for a product or service, and the consumer’s failure to respond is deemed as acceptance of the offer. A common example is a so-called free trial, in which consumers are offered a free trial period for a product or service but must provide their billing information to receive the promotion. The free trial includes additional terms, which are not clearly disclosed, stating that unless consumers cancel the goods or services, they are agreeing to continue to receive and pay for them.

The current regulations, adopted in 1973, regulate only one type of negative option marketing: the delivery of merchandise where consumers receive periodic communications informing them that merchandise will be delivered unless they decline within a set time frame.

The letter recommends the FTC expand its regulations to achieve the following:

• Informed Consent: In addition to consenting to any trial offer, sellers should have to obtain separate consent in order to charge consumers for goods or services after the trial period has ended.
• Periodic Notices: Sellers should be required to send regular notifications informing consumers that they are enrolled in a negative option plan; disclose the timing, amount, and method by which the seller bills consumers for the renewal; and provide a convenient cancellation method.
• Define Simple Cancellation Processes: Consumers should be allowed to cancel their memberships using the same method as enrollment.
• Refunds: Consumers who are unwittingly enrolled in negative option plans should be entitled to a refund from the date of enrollment.

Joining Raoul in the letter are the attorneys general of Colorado, Delaware, the District of Columba, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Dakota, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and Wisconsin.

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