1. 9/30/2011
Getting to Yes:
The New Rules for Obtaining Credit Card
Authorizations and Advance
Consent/Negative Option Campaigns
Online
Helen Mac Murray, Partner
Mac Murray, Petersen & Shuster LLP
6530 West Campus Oval, Suite 210
New Albany, OH 43054
hmacmurray@mpslawyers.com
Office: 614-939-9955
Fax: 614-939-9954
Mobile: 614-537-1616
What programs are effected?
• Upsells
• Continuity plans
• Auto ship programs
• Any recurring charges based sale
• Free trial programs
• Risk-free programs
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2. 9/30/2011
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3. 9/30/2011
What are the new laws?
• Restore Online Shoppers’ Confidence Act
(federal)
• California’s Song-Beverly Credit Card Act
of 1971; as amended 2010
• Florida Senate Bill 1884
• DMA Ethical Guidelines as revised
Other Relevant Laws
• Electronic Funds Transfer Act (EFTA)
• Regulation E, 12 C.F.R. Sec. 205.10(b)
• Federal Trade Commission Act (Aiding
and Abetting)
• State consumer protection laws enforced
primarily by state attorneys general
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4. 9/30/2011
Restore Online Shoppers’
Confidence Act
• Congress spent a year investigating
• 2009 FTC Report
• 2007 FTC Workshop
Definitions
Initial Merchant
A person that has obtained a consumer's billing
information directly from the consumer through an
Internet transaction initiated by the consumer.
Post-Transaction Third Party Seller
A person that (1) sells, or offers for sale, any good or
service on the Internet; (2) solicits the purchase of such
goods or services through an initial merchant after the
consumer has initiated a transaction with the initial
merchant; and (3) is not the initial merchant or a
subsidiary, affiliate or successor thereof.
More Definitions
Negative Option
“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”.
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5. 9/30/2011
More Definitions
Data Pass
Consumers unknowingly authorizing a
merchant to transfer the consumer's
payment information to another merchant
for a separate online sale without
otherwise requiring the consumer to
reenter payment information.
Prohibitions/Obligations
Post-transaction 3d party sellers
Before obtaining billing info must:
Clearly & conspicuously disclose all material
terms including:
• Description of goods/services
• That the 3rd party seller is NOT
affiliated with the initial merchant
• Cost
Data Pass Prohibition
• Initial merchant can not disclose payment
method
• Including credit card, debit card, bank
account, other financial account number or
any other billing information that is used
for initial transaction
• To any post-transaction third party seller
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6. 9/30/2011
Negative Options Online
Can’t charge or attempt to charge
consumer unless:
Before obtaining consent to buy, clearly and
conspicuously disclose all material terms of
transaction
Before charging card, obtain consumer’s
express informed consent
Provide simple way to stop recurring charges
More Definitions
Clearly and Conspicuously
Shall mean that such statement or
disclosure is disclosed in such size,
color, contrast, location, duration,
and audibility that it is readily
noticeable, readable and
understandable.
Enforcement
• FTC
• State attorneys general
• Others?
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7. 9/30/2011
Song-Beverly Credit Card Act of 1971
(as revised by SB 340)
• Became effective 12-1-10
• Only addresses negative option and
continuity programs
• Applies to any marketing medium
More Definitions
Continuous Renewal
“A plan or arrangement in which a
subscription or purchasing agreement is
continuously renewed until the customer
cancels the renewal”.
Definitions
Automatic Renewal
“A plan or arrangement in which a
subscription or purchasing agreement is
automatically renewed at the end of a
definite term for a subsequent term”.
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8. 9/30/2011
Automatic Renewal Offer Terms
(1) That the subscription or purchasing
agreement will continue until the
consumer cancels.
(2) The description of the cancellation
policy that applies to the offer.
Automatic Renewal Offer Terms
(3)The recurring charges that will be
charged to the consumer's credit or debit
card or payment account with a third
party as part of the automatic renewal
plan or arrangement, and that the amount
of the charge may change, if that is the
case, and the amount to which the charge
will change, if known.
Automatic Renewal Offer Terms
(4)The length of the automatic renewal
term or that the service is continuous,
unless the length of the term is chosen
by the consumer.
(5) The minimum purchase obligation, if
any.
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9. 9/30/2011
Requirements
(1) Fail to present the automatic renewal
offer terms or continuous service offer
terms in a clear and conspicuous manner
before the subscription or purchasing
agreement is fulfilled and in visual
proximity, or in the case of an offer
conveyed by voice, in temporal proximity,
to the request for consent to the offer.
More Requirements
(2) Charge the consumer's credit or debit
card or the consumer's account with a
third party for an automatic renewal or
continuous service without first obtaining
the consumer's affirmative consent to the
agreement containing the automatic
renewal offer terms or continuous service
offer terms.
More Requirements
(3) Fail to provide an acknowledgment that
includes the automatic renewal or continuous
service offer terms, cancellation policy, and
information regarding how to cancel in a manner
that is capable of being retained by the
consumer. If the offer includes a free trial, the
business shall also disclose in the
acknowledgment how to cancel and allow the
consumer to cancel before the consumer pays
for the goods or services.
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10. 9/30/2011
Other Issues
• Methods to cancel
• Material changes
• Remedies
• Unconditional gift!
Florida Sub. SB No. 1884
• Becomes effective 10-1-11
• Differences from federal law
• Special requirements
Helen Mac Murray, Partner
Mac Murray, Petersen & Shuster LLP
6530 West Campus Oval, Suite 210
New Albany, OH 43054
hmacmurray@mpslawyers.com
Office: 614-939-9955
Fax: 614-939-9954
Mobile: 614-537-1616
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