Indiana Attorney General, FTC and BBB Warn Consumers About “Free Trial’ Scams
Indiana Attorney General Curtis Hill said this week to beware of “free trial” scams proliferating on the internet. Specific reference was made to fake celebrity endorsements, and products touting weight loss and increased energy.
According to reports, the Federal Trade Commission has documented losses of more than $1.3 billion in cases of this type during the last decade. State AGs and the Better Business Bureau have now made it clear that they also intend to target promotional activities.
Without limitation, the Restore Online Shopper’s Confidence Act covers continuity or “negative option” marketing. To comply with ROSCA, marketers must, without limitation, clearly and conspicuously disclose the material terms of the transaction before obtaining billing information; obtain express informed consent before charging the consumer; and provide a “simple mechanism” for the consumer to stop recurring charges.
Marketers that offer subscription-based services including through a website to California consumers must comply with Cal. Bus. & Prof. Code sections 17600-17606 by making certain disclosures regarding automatic renewal terms. California’s law, widely considered more onerous than its federal counterpart, requires enhanced compliance requirements for trial and subscription offers. It requires, without limitation, an online means of cancellation, that subscription billing terms to be made in close proximity to the “Order” button, that the subscription billing terms be provided to the consumer before the order is completed, that material terms be located in visual proximity to the request for consent to the offer, and that consumers be provided with a written acknowledgement of all material terms.
ROSCA compliance and enforcement is an FTC favorite. Automatic renewal programs are now apparently a favorite of state regulatory agencies and the BBB, both of which are concerned about consumers providing credit-card information in the belief that they only are paying a small fee for shipping and handling when, in fact, mouseprint disclosures explain that unless consumers return the product within a few days they will be billed a larger fee.
“Consumer protection is an important focus of my office,” said the Indiana Attorney General. “We must use every available tool to safeguard Hoosiers from scammers trying to take people’s money or steal their identities. One way we make progress on this front is through collaboration with partners such as the Better Business Bureau and the Federal Trade Commission. I’m pleased to be working with both of them in this effort to combat deceptive free trial offers.”
Representatives from the BBB and the FTC joined the Indiana Attorney General Hill at a recent press conference to bring attention to automatic renewal marketing campaign concerns.
“Deceptive free trial offers permeate the internet, often using big claims and celebrities to lure consumers,” said the BBB Central Indiana President and CEO. “Before accepting any offer, it’s crucial that consumers understand all terms and conditions by carefully reading the fine print.” “People see ads for diet pills, wrinkle creams, and more. Thinking they can get a free sample by paying a dollar or two on their credit card. It may see simple to try but people find that there are huge catches in these deals and hidden terms,” the BBB President stated.
Todd Kossow, FTC investigation lawyer and director of the FTC’s Midwest Region in Chicago, stated that the federal agency continues to aggressively investigate and enforce these matters.
“The Federal Trade Commission is proud to partner with the Indiana Attorney General and the Better Business Bureau to help get the word out about free trial offer schemes and the steps consumers should take to avoid them,” Kossow said. “The FTC will continue, through aggressive enforcement, to stamp out schemes that can cost consumers hundreds of dollars a month under the guise of a ‘risk-free trial.’ ”
Richard B. Newman is an FTC compliance attorney at Hinch Newman LLP.
Attorney advertising. Informational purposes only. Not legal advice. Previous case results do not guarantee similar future result.