Free trials can lead to unexpected recurring billing traps. But consumers have options.
(Tampa Bay, FL) December 1, 2015—Negative option billing turns the acceptance of a free offer or trial into an obligation to purchase with a burden on the prospect to terminate the obligation in a timely manner or risk credit card debt.
“It is legal,” said Evan Kelly of the Better Business Bureau, “but it is definitely questionable sales tactics.” (1)
Gary Cardone, CEO of dispute mitigation company eConsumerServices, cautions that negative billing practices may be legal on paper, but easily fall into grey areas where the consumer is at risk. “Many of these deals show intent to hide vital data from the consumer and/or make it difficult to get out of a contract entered into unwittingly,” Cardone said. “They do not follow the requirements of existing laws and the Consumer Protection Act, and are therefore not legal. As they depend on consumer ignorance regarding their own rights, everyone should be alert to this practice, especially with the Holidays upon us.”
The U.S. Senate Committee on Commerce, Science, and Transportation recently launched an investigation into various companies in response to a mountain of consumer complaints. Common to all reports was an operating basis that launched a pop-up screen after an online purchase had been made with a credit card. The screen would offer a different product by a separate company, as well as a sign-up promotion that only asked for an email address. However, the consumer’s credit card would be billed for the underlying product offering because, unreported by the company, the consumer’s credit card information was provided by the first company to the second company. (2)
JustFab, a membership-based fashion retail conglomerate that includes Kate Hudson’s Fabletics and the Kardashian-affiliated ShoeDazzle, has recently come under legal scrutiny for characteristic difficulty in unsubscribing and obscuring the nature of the membership contract. (3)
Kelly Walker, Santa Cruz County Assistant District Attorney, told BuzzFeed, “This is becoming a business practice that we’re becoming very concerned about. We are setting up a task force here in California just to deal with these companies with automatic renewal or automatic negative option sales programs.”
As U.S. citizens over the age of 50 approach 30% of the population per AARP, unscrupulous merchants are finding a growing segment to entrap with bait-and-switch negative option billing. Worse, the vital consumer information explaining the deal and how to opt out is often buried in fine print elsewhere on the website. Opt-out procedures for automatic billing are often complicated and even go so far as only allowing month-to-month cancellations, with the obligation continuing the first month the customer doesn’t manually opt out.
“Canada has been hit hard with negative option merchants and recurring billing subscriptions,” says Cardone. “While many merchants are honest, legitimate retailers, without a savvy consumer base, Canadians can fall victim to deceptive advertising and unscrupulous merchants who pretend otherwise.”
Cardone explained that while some merchants may practice questionable marketing, consumer help and protection can be relatively simple. Efficient dispute resolution is a necessary component of eCommerce business solutions and one wherein resolution between merchants, banks and consumers can be quickly forged.
Cardone’s company, eConsumerServices, acts as an online mediator to get a quick and peaceful resolution reached and a refund posted, often instantaneously. The service is free to consumers for most situations, and costs just $2 for longer resolutions. With one form to fill out, eConsumerServices can get money back and cancel any unwanted subscriptions.
About Global Risk Technologies and eConsumerServices:
Global Risk Technologies is most known for their role in payment processing solutions that cater to each side of the value chain: Chargebacks911.com and eConsumerServices.com. The firm is headquartered in Tampa Bay, Florida, with offices in Ireland and Atlanta. They have approximately 350 employees worldwide and currently manage over 150MM in transactions each month, with clients located in the U.S. and Europe.
eConsumerServices focuses on the cardholder or consumer in order to encourage transactional resolution before it progresses to a chargeback. eConsumerServices is for the B2C (business-to-consumer) sector of Global’s initiative, in working to realize greater standardization and increased efficiency in the payment space in terms of managing risk and handling chargeback issues. eConsumerServices is an online service that acts as a mediator between merchants and consumers, helping to resolve transaction disputes. For more information, visit www.econsumerservices.com.
- Mojtahedi, Negar. Global News Cancer Survivor Owed Hundreds of Dollars after Being Roped into Negative Option Billing. N.p., 12 Oct. 2015. Web. 25 Nov. 2015. globalnews.ca/news/2272214/what-consumers-need-to-know-about-negative-option-billing/.
- “Putting the Positive in Negative Option Billing—KMT.” KMT. N.p., 18 Nov. 2012. Web. 25 Nov. 2015. kleinmoynihan.com/putting-the-positive-in-negative-option-billing/.
- Schlossberg, Mallory. “People Are Calling Kate Hudson’s Wildly Popular Clothing Company a ‘scam’“ Business Insider. Business Insider, Inc, 28 Sept. 2015. Web. 25 Nov. 2015. businessinsider.com/are-justfab-and-fabletics-scams-2015-9.
Karla Jo Helms
Phone: 888-202-4614 ext. 802