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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




                                                                  1
9/30/2011




       2
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




                                                     3
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”.




                                                                      4
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




                                                       5
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?




                                                       6
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”.




                                                  7
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.




                                                      8
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.




                                                             9
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




                                              10

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Notes Version: "Getting To Yes" The New Rules For Obtaining Credit Card Authorizations And Advance Consent Negative Option Campaigns Online

  • 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 1
  • 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 3
  • 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”. 4
  • 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 5
  • 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? 6
  • 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”. 7
  • 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. 8
  • 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. 9
  • 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 10