Getting to Yes:

The New Rules for Obtaining Credit Card Authorizations and Advance

Consent/Negative Option Campaigns Online

Helen Mac Murray, PartnerMac Murray, Petersen & Shuster LLP6530 West Campus Oval, Suite 210

New Albany, OH 43054hmacmurray@mpslawyers.com

Office: 614-939-9955Fax: 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

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

Restore Online Shoppers’ Confidence Act

• Congress spent a year investigating

• 2009 FTC Report

• 2007 FTC Workshop

DefinitionsInitial 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”.

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/ObligationsPost-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

Negative Options OnlineCan’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?

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”.

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.

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.

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