Raoul Working To Crack Down On Negative Option Billing

By Benjamin Cox on December 3, 2019 at 3:00pm

The Illinois Attorney General is working to end negative option marketing schemes. Kwame Raoul along with 22 attorneys general issued a letter to the Federal Trade Commission to adopt stronger regulations to prevent customers from negative option marketing platforms.

Negative option marketing involves a consumer receiving an offer for a product or service, and the consumer’s failure to respond is deemed as acceptance of the offer. A common example is a so-called free trial, in which consumers are offered a free trial period for a product or service but must provide their billing information to receive the promotion. The free trial includes additional terms, which are not clearly disclosed, stating that unless consumers cancel the goods or services, they are agreeing to continue to receive and pay for them.

The current regulations, adopted in 1973, regulate only one type of negative option marketing: the delivery of merchandise where consumers receive periodic communications informing them that merchandise will be delivered unless they decline within a set time frame. Raoul and the 22 other attorneys general recommend informed consent in order to charge consumers after a free trial has ended, periodic notices informing consumers that they are enrolled in a negative option plan; disclose the timing, amount, and method by which the seller bills consumers for the renewal; and provide a convenient cancellation method; have a defined simple cancellation process; and provide timely refunds to consumers who are unwittingly signed into a negative option plan. According to the Cornell Policy Review in May 2018, “gray charges” stemming from negative option billing costs consumers $14.3 billion dollars a year.