Avoiding deceptive ‘opt-out’ online scams

Proverbs survive because of their universality. Take the adage, “One bad apple spoils the barrel.” It teaches us that good people (or good businesses) can be tainted by association with those whose actions are perceived as unscrupulous, even if they themselves don’t employ the same deceitful tactics.

Here’s an example: Because a very small number of e-commerce merchants have abused a practice called “negative renewal option billing,” consumer confidence in the trustworthiness of all online retailers is being undermined. According to a recent Visa Inc. survey, 29 percent of Americans believe they’ve been victimized by this practice. The Federal Trade Commission  concurs, noting that approximately 3.2 million Americans reported these or similar types of unauthorized charges in 2007.

In a nutshell, negative option billing is where customers are required to opt out of recurring charges for future products or services, often by being instructed to unclick a pre-checked “terms and conditions” or “payment authorization” box. This clause is usually buried in the fine print most people don’t bother to read.

So how are people lured in? It may be as simple as signing up for a free trial or sample of a product or service, not realizing that you’ve actually agreeing to be billed monthly for future shipments or charges if you don’t proactively cancel the service at the end of the trial period. Canceling itself can be an ordeal, since some merchants have notoriously slow or unresponsive customer service (endless holds, no toll-free service number, hiding or omitting opt-out information, difficult return policies, etc.).

The problem has grown in recent months, thanks to deceptive merchants taking advantage of lower advertising costs to reach broader audiences. Visa, which monitors the merchant payment system, found that merchants using deceptive marketing practices have up to 20 times as many consumer disputes as average e-commerce merchants.

In response the FTC, the Better Business Bureau and Visa have joined forces to educate the public about negative option marketing and how to avoid being victimized. Among the steps they recommend are:

•Read and understand all terms and conditions (the fine print) before completing any transaction.

•Pay particular attention to any pre-clicked boxes before submitting your payment card information.

•Always review your monthly credit and debit card statements to spot any unauthorized charges.

If you’re being victimized by unauthorized recurring charges or inadvertently signed up for them, first try to resolve the situation with the merchant. Look for cancellation instructions on their website or call customer service.

If they can’t or won’t resolve the problem, contact the financial institution that issues your card and dispute the charges. As part of your cardholder agreement, they will advocate on your behalf with the merchant’s bank.

Also report the problem to the Better Business Bureau —ideally, with the local chapter where the merchant is headquartered. And finally, report abusive marketing practices to the FTC’s complaint assistance center at www.ftc.gov/complaint.

To learn more about protecting yourself from e-commerce scams, visit Visa’s dedicated web page at www.visa.com/dmp.

(Jason Alderman directs Visa’s financial education programs. Sign up for his free monthly e-Newsletter at www.practicalmoneyskills.com/newsletter. )


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