Why Am I Being Charged? Read Fine Print on Negative Option Sales
By Jimmy Asa
A few months ago, I was duped by a business that auto-billed me for something I never wanted or realized I had signed-up to receive. If it could happen to me, then it could happen to you.
When you buy something with a feature that provides continuing service or regular product shipments unless you cancel, that’s a negative option sale. If you haven’t heard the term “negative option” before, you’re not alone. This sales tactic is called a “negative” option because, unless you specifically opt-out of the additional purchase, the seller automatically takes your lack of a response to mean that you want to keep buying their product or some additional service, sometimes indefinitely. Consumers have unknowingly made these payments for months or years at a time and lost hundreds or thousands of dollars.
According to the Federal Trade Commission, there are four types of negative options:
- Automatic Renewal: The default setting is to renew the subscription at the end of each billing period, unless consumers specify not to renew.
- Continuity of Service: Consumers will continuously be billed for and receive products until they opt-out of the program.
- Free-to-Pay Conversion: The product will be free for a limited time, then the business will begin to automatically bill your account until you opt-out of the program.
- Pre-Notification: Consumers will receive notices offering products or services, receive the items, and then be charged unless they opt-out.
In some cases, businesses will make this enrollment clear. However, very often this information will be hidden deep in the fine print or omitted altogether.
Businesses have been fined millions of dollars by FTC for these potentially deceptive advertising practices. According to FTC’s .com Disclosures: “A disclosure that is buried in a long paragraph of unrelated text will not be effective. Even though the unrelated information may be useful, advertisers must ensure that the disclosure is communicated effectively.”
Additionally, the “Restore Online Shopper’s Confidence Act” (ROSCA), lays out new rules that may make these types of sales illegal unless certain disclosures are met.
According to a recent FTC blog post, businesses must clearly and conspicuously disclose any terms or conditions before they take your billing information, they must receive customers’ implicit consent before auto-billing their account, and there must be simple methods by which consumers can opt-out of continued charges.
The BBB Code of Advertising states that “An advertisement as a whole may be misleading although every sentence separately considered is literally true. Misrepresentation may result not only from direct statements but by omitting or obscuring a material fact.”
BBB offers the following tips:
- Be sure you fully understand the terms and conditions before you buy.
- Remember to cancel on time, so you won’t be auto-billed if it is a “free trial” offer.
- Watch out for any pre-checked boxes that appear when you make your online purchase. Many times, these boxes will already be checked or selected and you must un-check them to opt-out.
- Check your credit card and bank statements for any unauthorized or reoccurring transactions.
- Reach out to the business and ask for a refund, then contact your bank to stop future payments.
- Use prepaid credit cards. This may help to minimize any unwanted reoccurring charges.
- Find trustworthy businesses on bbb.org.
- Contact your BBB for assistance or file a complaint if you think you’ve encountered a negative option sale with inadequate disclosures.
Reproduced with permission from the Better Business Bureau – July 2014 Bulletin