Not to be outdone by federal policymakers on the “hot button” regulatory issues of the day, California once again has characteristically entered the fray by recently enacting one of the toughest laws in the nation on negative option, or “continuity,” marketing, the common yet increasingly scrutinized practice in which a consumer consents in advance to purchase products on a recurring basis until he chooses to cancel. 

Nationally, the new Online Restore Shoppers’ Confidence Act (also known as “Rockefeller,” after its sponsor, Sen. Jay Rockefeller, D-WV) now requires disclosure of Internet continuity offer terms before the seller obtains consumer billing information. The Federal Trade Commission also is continuing to crack down on negative options, most recently in its big Internet marketing case against iWorks (disclosure: author represents a defendant in the action.)

Now, California has joined the act, and raised the ante, by enacting Business and Professions Code §§17600-17606, which – in some respects – is more exacting than the federal standards.

The new California law requires marketers to:

• Clearly and conspicuously disclose the terms of negative options, either in “larger type than the surrounding text,” or, if the same size as surrounding text, then in “contrasting type, font, or color” or “set off” by markings, “in a manner that clearly calls attention to the language.” This minimum mandate of “equal or greater size” is more precise and inflexible than the FTC’s “clear and conspicuous” standard.
• Obtain the consumer’s advance affirmative consent for future recurring charges.
• Provide a written acknowledgement of the negative option that includes the offer terms, cancellation policy and cancellation method.
• In the case of a free-trial offer, disclose and honor the cancellation policy.
• Provide a toll-free telephone number, E-mail address, postal address (when the seller directly bills the consumer), or another easy and timely cancellation method.
• Notify consumers of any material changes to the negative option terms prior to their implementation.

Violations can lead to civil penalties of up to $2,500 per violation (each unlawful continuity offer or transaction). The California Attorney General and District Attorneys are among the most aggressive state consumer protection agencies in the country. Undoubtedly, they are already looking for “test cases” to enforce the statute, so if you use negative option in California (which can include any Internet-based offer made to a California resident), beware of the new requirements – in particular the need for disclosures to be of “equal or greater size” than the surrounding text. Read More on our site at www.ftcadlaw.com

- Stephanie Siclari

YES. And you should also keep paypal.

Paypal provides an easy and convenient way to begin taking payments for your business yet it also has a few limitations.

1. Feel – Paypal gives a site an “amateurish” feel. Customers tend to believe the business is very small if it only accepts paypal.

2. Funding Time – Paypal requires manual transfers from your paypal account to your bank account where an InChek account deposits directly to your bank

3. Flexibility – The reporting functionality within the InChek payment gateway provides a far superior experience relative to tracking and searching transaction data

4. Fees – Merchant accounts can often be cheaper than Paypal

5. Personal service. I love paypal but don’t love trying to get answers from them by phone.

So while I definitely recommend keeping your paypal account, I would also venture a guess that you do not realize how easy and affordable it is to get set up with your own merchant account as well. More payment options = more flexibility = more happy customers + more income for you.

1) Unique Positioning: We serve several niches including high risk credit card processing which we began in April 2010. In one year we entered the niche and mastered it. We have been able to get clients up and running and keep them up and running by providing important counsel in risk mitigation strategies.

2) Unique Relationships: The strength of our relationships is what allows us to provide a level of service to our clients that seems to be unique in our industry. We screen our acquiring relationships very carefully and only partner with those who demonstrate a commitment and ability to care for the needs of our clients.

3) Integrity and Honesty. We are very direct with our clients. We tell them how we see it. Never will we say we can do something when we can’t do it…we don’t promise accounts at 10bp over cost with no reserve. Our clients know what to expect and our relationships know they can count on our clients to cooperate and work in a mutually beneficial way.

4) Abysmally Low Attrition. In an industry characterized by very high turnover, our stick with us. They know they can count on us. Therefore they are not easily sold by the next guy who promises the world. I am especially proud of not only our very low attrition rate but also the fact that our clients are trustworthy. Generally, they do the right thing and don’t create risk issues. Basically, I love our clients…many of whom have now become friends.

These four factors, combined with some help from the Man upstairs, and alot of inspiration from Tyrone, have given us a remarkable growth curve…in my opinion anyhow

At InChek, this crackdown hit close to home. Many of our clients were affected and we saw good people with families lose jobs on which they were reliant for income. In a time when the economy is struggling and the unemployment rate is very high, one must wonder what the motivations were behind those in charge of this crackdown. While I certainly do agree that the internet marketing needed to be cleaned up, I believe a compliance period in which merchants were given an opportunity to change their offers would have been far more ethical and effective than instant terminations with huge fines.

At any rate, we are committed to seeing our clients grow and prosper in the new landscape. To that end, we have developed a 48 point compliance checklist that combines all known MC, Visa, and FTC regulations related to internet marketing. Our clients’ sites are carefully inspected prior to approval.

The irony is that only certain industries were targeted. I pay a monthly recurring membership fee for my fax service that could be classified as negative renewal option because I will continue to be billed until I cancel. I warn my clients who operate within industries that have not been targeted to bring their offers into compliance.

Here are a few starting points:

• Affirmative Agreement: Put a checkbox on your site that requires your customers to affirmatively agree to the terms of your offer.
• CLEAR Terms: While your terms should be clearly spelled out in a separate link “Terms and Conditions,” you must clearly display the renewal terms in at least a 12 point font next to the checkbox. This statement should begin with “I agree..”
• Free Trials: Your trial period cannot imply that your customer is receiving something for free if it is not truly free. Free means there are no strings attached and specifically that you will not bill their card for any amount of money.
• Data Sharing: Don’t do it, ever.
• Options: Give your customer options. For example offer a one off sale, a prepaid sale, and a fixed period continuity offer. Once you know how long your tail usually lasts, why not cut the billing there since many of those transactions will result in chargebacks anyway?
• Be Available: Make sure your descriptors are clear and include a customer service number that is answered by an in house or outsourced professional call center group.

This crackdown is global so going offshore without coming into compliance with mastercard standards is not the solution that many think it is. Run a clean offer, sell a high quality product, don’t be deceptive, and market properly and you will have a model fit for long term success.

We offer our compliance review to any business who wants to make sure they are in compliance with all FTC, Visa, and Mastercard regulations.