RICHMOND, Va. — Attorneys General are urging the Federal Trade Commission (FTC) to step in and prevent customers from being trapped into recurring payments by subscription-based companies.
Virginia's Attorney General Mark Herring is part of the coalition that sent a letter to the FTC. The letter asked the agency to expand its regulations that would require businesses to provide individuals with a notification before enrolling consumers in a subscription services following a free trial period and regarding how consumers can cancel the subscriptions before actually being billed.
The letter asks to expand existing negative option regulations to cover these “free trial” business models.
Herring said 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 form of negative option marketing is a "free trial."
Customers are offered a free trial period for a service or product, but they need to submit their billing to receive the promotion. However, there are usually additional terms that aren't disclosed. These terms normally claim 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.”
Attorney General Herring and 17 others recommended the following regulations to the FTC:
- 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.
View the full letter to the FTC below:
The other attorneys general that joined Herring sending the letter included 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.
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