AG Shapiro Urges Federal Trade Commission to Take Action against Deceptive Marketing Practices

December 3, 2019 | Topic: Consumers

Attorney General Shapiro Leads Coalition of State Attorneys General Seeking Measures to Prevent Consumers from Being Trapped in Recurring Payments

HARRISBURG – In a letter to the Federal Trade Commission on Monday, Attorney General Josh Shapiro, leading a coalition of 23 state Attorneys General, urged the FTC to adopt sorely needed regulations to prevent consumers from being deceived by negative option marketing schemes. The letter was submitted to the FTC, which is considering whether to use its rulemaking authority to expand existing negative option regulations.

With negative option marketing, a marketer presents consumers with an offer and the consumers’ silence or failure to take action in response is deemed acceptance of the offer. One especially problematic type of negative option offer involves a so-called “free” trial. Consumers are offered a free trial period for a product or service but have to submit their billing information to receive the promotion. However, the free trial has 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 announcements that merchandise will be delivered unless they decline within a set time frame (e.g., book-of-the-month clubs).

“By this letter, we are urging the FTC to update its rule to address these pernicious practices that often prey on elderly consumers,” AG Shapiro said. “We have found that deceptive negative option practices continue to be a problem for consumers who often find themselves locked into a cycle of recurring payments with no meaningful way to escape. It’s an unfair practice that has to change.”

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

  • Informed Consent – In addition to consenting to any trial offer, sellers should have to obtain a separate consent to be charged for goods or services after the trial period has ended.
  • Periodic Notices – Sellers should be required to send regular notifications that consumers are enrolled in a negative option plan, disclose the timing, amount, and method by which the seller bills the consumers for the renewal, and provide a convenient method to cancel the goods or services.
  • Define Simple Cancellation Processes – Consumers should be allowed to cancel their memberships by 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.

Pennsylvania Attorney General Josh Shapiro and New York Attorney General Letitia James drafted the letter, which was joined by Attorneys General from Colorado, Minnesota, Kentucky, Massachusetts, Washington, New Jersey, Michigan, Rhode Island, Delaware, DC, Nevada, Oregon, Virginia, Iowa, and Maryland.

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