Post-Transaction and Negative Option Billing Schemes

shark in suit cartoon to accompany post about negative option billing regulations

Back in the day, in the absence of online marketing laws, negative option billing schemes were much-used and much-abused.

How Did Negative Option Billing Scams Work?

Sellers tacked on sneaky recurring charges during the online checkout process, by obscuring the fact that buyers had to opt-out of programs to avoid monthly credit card charge.

Post-transaction offer scams also proved lucrative. Consumers thought they were signing up for FREE add-ons, when in reality they were clicking “Hell Yeah!” to a whole lot of monthly subscription fees.

After several years, though, lawmakers earned their Internet merit badges and clamped down on nefarious online marketing practices. Today, it is 100% against the law to use shady post-transaction and negative option marketing techniques.

Let’s review some common questions about the legalities of negative option billing.

Is Negative Option Billing Illegal in the United States?

Yes. Negative option billing is legal in the United States, if proper disclosures are in place. However, deceptively luring people to commit to a “free” service, without conspicuously disclosing an eventual charge is squarely in violation of United States Code.

What Is The Government’s Definition of “Negative Option Features?”

The prevailing legal definition of “negative option features” is outlined in U.S.C. Title 16, Chapter 1, Subchapter C, Part 310.2 – also known as the Telemarketing Sales Rules. It reads:

“Negative option feature” means, in an offer or agreement to sell or provide any goods or services, a provision under which the customer’s silence or failure to take an affirmative action to reject goods or services or to cancel the agreement is interpreted by the seller as acceptance of the offer.”

In What Laws Is Negative Option Marketing Addressed?

Several U.S. laws address negative option issues. Most Federal Trade Commission guidelines — like the Dot Com Disclosures, Telemarketing Sales Rule and Biz Opp marketing statutes — discuss negative option billing. Additionally, the Restore Online Shoppers’ Confidence Act includes a section specifically outlawing certain negative option marketing techniques.

What Happens If I Get Caught Running A Negative Option Billing Scam?

The Federal Trade Commission doesn’t takes a hard-line when punishing consumer scammers. If your operation generates a healthy profit, criminal fraud charges are possible. Absolutely worst-case scenario: you land in the clink for a few years. Punishments for civil charges usually involve a fine and a promise to never use sneaky marketing tactics again. The FTC may even go after your parents’ and spouse’s stuff.

What Should I Do If I Have A Negative Option Legal Matter?

If you’re faced with a negative option billing dilemma (for example, the FTC is blowing up your inbox or beating down your door), and you don’t know enough legalese to represent yourself pro se, contact us here at Kelly Warner Law. We’re proud online marketing law nerds and know the regulations inside and out. We’ll review your case and figure out your best recourse.