The FTC recently announced a new initiative in cooperation with Visa and the BBB "to alert consumers to online deceptive marketing connected to free trial offers that require individuals to cancel or opt-out of a recurring charge for future products or services."
Sound familiar? It should — it is the process by which most adult paysite memberships are sold today.
While the Commission is quick to point out that both free trial offers and recurring subscriptions are legitimate marketing methods, the growing abuse of these sales techniques is raising eyebrows. Director of the FTC's Bureau of Consumer Protection, David C. Vladeck, is particularly concerned about a free trial feature known as the "negative option."
According to the Commission, in a negative option feature, a company takes a consumer's failure to cancel a free trial offer as permission to begin charging for the service. While many merchants use this billing process appropriately, others pre-check consent boxes, bury the details of the offers in the fine print, terms and conditions, and make cancellations or returns difficult, catching consumers in a cycle of recurring charges for products and services they do not want.
"Free trial marketing can be convenient for consumers — if the terms are clearly spelled out beforehand," Vladeck said. "Legitimate marketers don't hide critical information about costs or cancellation policies to get their customers to agree to future charges."
Among the advice to consumers offered by FTC, Visa and BBB representatives is to read and understand all terms and conditions and to pay particular attention to any pre-checked boxes before you submit your payment card information for an order. They also advise that if the situation cannot be resolved with the merchant, then the card issuer should be contacted to dispute the charge.
For its part, Visa reports that it has terminated more than 100 scammers over the past six months for using bogus marketing techniques, such as hiding cancellation links, using pre-checked cross-sales with undisclosed terms, and other offenses, including using credit card information that was required "to pay for shipping and handling" for multiple additional, often recurring, charges.
"We've been monitoring this situation from this past summer in particular," Visa VP William M. Sheedy said. "Consumers are being fleeced."
"The game here is to get people hooked, keep them on the hook for monthly charges as long as you can, and only stop making those charges when you're forced to," BBB Online VP Stephen Salter said, adding "The product is irrelevant to getting the charges on the card."