Attorney General urges Federal Trade Commission to stop deceptive marketing practices

Attorney General Mark R. Herring has urged the Federal Trade Commission (FTC) to adopt expanded regulations that would require businesses to provide adequate notification before enrolling consumers in their subscription services following a free trial period and regarding how consumers can cancel these subscriptions before actually being billed. Attorney General Herring and a coalition of 17 attorneys general have sent a letter to the FTC urging them to expand existing negative option regulations to cover these “free trial” business models.

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 once the free trial is finished.

“These free trial subscription services are becoming more and more common but folks need to pay close attention to what they’re really signing up for,” said Attorney General Herring. “Right now, companies have the ability to lure consumers into subscription services through free trials and bill them without any kind of adequate notification process. It’s important that the FTC cover these types of businesses under these existing regulations so we can protect consumers from paying for a service they did not consent to purchasing.”

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).

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 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.

Joining Attorney General Herring in sending the letter are the attorneys general of Colorado, Delaware, Iowa, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Washington, and the District of Columbia.