Have you ever heard of a "Prenotification Negative Option Plan"?
You probably have and just didn't know it. Basically it's when you join a club or plan that offers to sell you some merchandise, often at an introductory discounted price. You then agree to receive the product or service automatically unless you tell the club not to send it.
I hate negative-option buying.
With my busy life, I always forget to cancel whatever it is I'm trying out and get stuck paying for books, CDs or magazines I don't want.
But what's worse about negative-option buying is that, often, you can't stop the product from coming even when you try. That happened to me once. I had just had my first baby and decided to try out a children's book club. I had read that it was important to read to your newborn.
I never got a chance to read the first shipment of books. First, my newborn only wanted to sleep and eat. Second, I only wanted to sleep and eat. I was too tired to read anything.
So I tried to cancel the book club membership. It was only then that I realized there wasn't clear information on how to do that. And when I say there wasn't any information, I mean there wasn't a Web address, telephone number or street address on any of the plan's materials to write to the company and cancel.
Finally, when the next book arrived, I never opened the package. Instead, I wrote on the front of it that the company was to never send me another book and that I would refuse to pay for or accept future deliveries.
Well, books still came, and so did the bills. Oh, but when a payment wasn't sent, then I got a call from the company. It was only then that I got out of that round-robin book club nightmare. While I had the operator on the phone, I canceled all future shipments.
I know I'm not alone. In June, New York-based Scholastic Inc. and two of its subsidiaries, Scholastic-At-Home and Grolier Inc., agreed to pay a $710,000 civil penalty to settle allegations that the companies violated laws in the marketing of their negative-option book clubs.
The Federal Trade Commission alleged that the companies' direct-mail and telemarketing campaigns did not give consumers important information they needed to know before joining the book club.
The FTC said consumers who did not know how the clubs operated complained that the companies sent them books they did not order and that the companies would not cancel their club memberships.
According to the FTC, the first club -- which the complaint identifies as the base book club -- offered consumers the opportunity to inspect a pair of books and automatically enrolled consumers in the club if they kept the books beyond a set preview period and paid for them. This first club required a four-book minimum purchase and then shipped books automatically each month after that.
If consumers made two purchases from the first club, they were automatically enrolled in a second club.
"There's a message in this order for any business that runs a negative-option club," said Lydia B. Parnes, director of the FTC's Bureau of Consumer Protection, in a release about the settlement. "Your company is responsible for letting potential customers know the rules that come with their membership before they enroll."
As usual with these types of consent orders, Scholastic did not admit to any violation of the law. But the decree does require the company and its subsidiaries to fully disclose membership terms.
The FTC enforces the "Prenotification Negative Option Rule." Under a prenotification plan, you receive periodic announcements describing merchandise you can buy. These notices typically inform you that merchandise will be sent to you automatically unless you return a form rejecting the offer within a specified time. Companies are required to give consumers clear and conspicuous information about their plans in any promotional materials or during any telemarketing presentation. In fact, here's what you should be told:
* Whether there is a minimum purchase obligation.
* Specifics on how you can cancel your membership.
* How often you will receive announcements and rejection forms.
* The procedure you need to follow to reject merchandise.
* The deadline for returning any form to avoid shipment of merchandise.
* Whether billing charges include postage and handling.
Some book, CD or video clubs may involve membership in another type of marketing program called a "continuity plan." This is where a product such as a newspaper subscription is sent until you tell the company to stop. You don't get an announcement or a rejection form before each product delivery. These types of plans are not covered under the FTC's Prenotification Negative Option Rule. However, companies using continuity plans are still required to give consumers clear information about terms and conditions.
I've sworn off negative-option buying, but if you like buying through a plan or club, carefully read the membership details. A yes today could mean a headache trying to say no later.
* On the air: Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and online at www.npr.org.
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