Subscriptions and Recurring Charges and the Restore Online Shoppers' Confidence Act

Posted by Clyde Hutchins | Aug 19, 2016 | 0 Comments

As noted earlier, the Electronic Fund Transfer Act, and the corresponding Regulation E apply to subscriptions and recurring charges. But those are not the only federal laws that regulate recurring charges. The Restore Online Shoppers' Confidence Act also applies to situations where consumers purchase products or services online that have recurring charges.

The Restore Online Shoppers' Confidence Act generally prohibits charging consumers for products or services sold online through a "negative option feature" unless certain conditions are met. A "negative option feature" is defined as, "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 other words, the consumer is invited to make a purchase with recurring shipments and charges, and the merchant assumes that the consumer wants to keep accepting the shipments until the consumer cancels.

The relevant portion of the Restore Online Shoppers' Confidence Act provides:

15 U.S.C. ยง 8403. Negative option marketing on the Internet

It shall be unlawful for any person to charge or attempt to charge any consumer for any goods or services sold in a transaction effected on the Internet through a negative option feature (as defined in the Federal Trade Commission's Telemarketing Sales Rule in part 310 of title 16, Code of Federal Regulations), unless the person-
(1) provides text that clearly and conspicuously discloses all material terms of the transaction before obtaining the consumer's billing information;
(2) obtains a consumer's express informed consent before charging the consumer's credit card, debit card, bank account, or other financial account for products or services through such transaction; and
(3) provides simple mechanisms for a consumer to stop recurring charges from being placed on the consumer's credit card, debit card, bank account, or other financial account.

If your company markets and sells its products or services to consumers through a negative option feature or similar recurring charge model, you should ensure that the company is following the Restore Online Shoppers' Confidence Act. You should ask the following questions: (1) Is the company clearly and conspicuously disclosing the material terms of the transaction? (2) Is the company obtaining the consumer's express informed consent before charging? (3) Does your company provide a simple mechanism to stop or cancel the recurring charges? If the answer to any of these questions is negative, then you should modify your disclosures, website or procedures to ensure compliance.

Note that the Restore Online Shoppers' Confidence Act is enforceable, (and has been enforced) by both the Federal Trade Commission and the state attorneys general.

When working for the attorney general's office, I would sometimes see companies falling short of the requirements of the Restore Online Shoppers' Confidence Act. If you would like a legal audit of your website and transaction and cancellation procedures or need other assistance related to compliance with the Restore Online Shoppers' Confidence Act, please feel free to contact Harmony Law.

About the Author

Clyde Hutchins

Clyde Hutchins is the founder of Harmony Law. Mr. Hutchins started his legal career in Cheyenne, Wyoming as a law clerk for the district court judges. Mr. Hutchins then entered private practice with a Wyoming based litigation and business law firm. Later, Mr. Hutchins went to Alaska, where he was the chief litigator for a firm that engaged in bond law, corporate law, securities law, and municipal law. The State of Wyoming hired Mr. Hutchins from Alaska to represent the State of Wyoming in the national tobacco arbitration and act as its tobacco settlement attorney. While in that position, as a hobby, he developed an enforcement unit for consumer protection for Wyoming residents. Mr. Hutchins moved to Colorado in 2016 and founded Harmony Law, LLC. Harmony Law is primarily engaged in civil litigation. It is also a general practice firm in the areas of business law, estate planning, consumer law and family law. Harmony Law is active in all state and federal courts throughout Wyoming and Colorado.


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Harmony Law engages in litigation in Wyoming and Colorado. If you have a serious dispute or have been sued, feel free to call. (970) 488-1857 in Colorado or (307) 222-7888 in Wyoming.

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