Markets Wired

Congress has passed the “Restore Online Shoppers’ Confidence Act” to combat deceptive online sales tactics that keep charging consumers for goods and services until they cancel their membership.  In so-called “negative option” plans, the seller interprets the consumer’s silence or failure to reject goods or services, or to cancel the sales agreement, as acceptance of the offer.

“We’re pleased Congress passed this legislation,” FTC Chairman Jon Leibowitz said.  “Too many companies are trying to use phony monthly billing to rip off Americans and this bill will help strengthen our hand.  Consumers should be able to make informed decisions, so the terms and conditions of any offer must be disclosed clearly and conspicuously.  I want to thank Chairman Rockefeller for his leadership on this issue.” 

S 3386 provides three important protections for online consumers.  First, it would make it unlawful for a post-transaction third-party seller – a seller who markets goods and services online through an initial merchant after a consumer has initiated a transaction – to charge, or attempt to charge, a consumer for any good or service sold in an online transaction, unless:

• the seller clearly discloses to the consumer all the material terms of the transaction; and
• the seller has obtained the consumer’s consent before charging their credit card, bank account, or other financial account.  Importantly, as a part of that consent, such sellers must obtain directly from the consumer the full financial account number to be charged.

Second, it would make it unlawful for any online seller to transfer a consumer’s financial account number to a third party seller.

Finally, S 3386 would make it unlawful for a seller to charge, or attempt to charge, a consumer for any good or service with a negative option feature in an online transaction, unless:

• the seller clearly discloses to the consumer all the material terms of the transaction;
• the seller has obtained the consumer’s consent before charging their credit card, bank account, or other financial account; and
• the seller provides a simple way for the consumer to stop charges.