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October 2005

Legislature Considers Negative-Option Billing Ban

Have you ever accepted an item that is free or at a reduced cost and were later told that by accepting the item that you had agreed to purchase additional items? State Representative Sue Jeskewitz, a Republican from Menomonee Falls, and 20 other Republican and Democrat lawmakers have introduced AB 574, a bill that would ban businesses from billing consumers for goods or services without the consumer’s knowledge or authorization.

This practice, known as “negative option billing,” has generated numerous complaints to the Wisconsin Department of Agriculture, Trade & Consumer Protection. According to the department, the complaints take three different forms.

Billings, Cards, Renewals

First, consumers complain they are being billed for a product or service based on accepting a free or reduced-price offer. The consumers argue that they were never told that they would become obligated to make additional purchases. One example is “free” pantyhose that many consumers received several years ago. Consumers were unhappy when they were later billed for additional unauthorized shipments.

A second example is where a consumer’s credit card gets charged by a company for an unordered item. This can happen because the company already has the consumer’s credit card information from a prior purchase. An example is where a consumer cashes a rebate certificate from a hotel, only to find out later that he or she then became enrolled in a travel-card subscription club.

A third example is a continuing agreement, such as for lawn maintenance service, where the price is increased without notice or is automatically renewed the following year without notice to the consumer.

Representative Jeskewitz argues AB 574 is needed because “consumers are being hurt by direct marketers who offer trial delivery plans that make tempting offers but do not clearly, if at all, reveal the terms of the sales plan.” And, according to Wisconsin Trade & Consumer Protection Administrator Janet Jenkins, the complaints her agency has received “represent the tip of the iceberg since consumers are less likely to file complaints about small dollar amounts.” Jenkins believes these so-called negative-option billing practices are “deceptive” and she supports AB 574.

Creating Curbs

AB 574 prohibits the following billing practices: (1) charging a person for consumer goods or services he or she did not agree to purchase or lease, (2) charging a higher price to the consumer than that was agreed upon, unless the consumer agrees to the higher price or is given the opportunity to cancel without penalty, (3) charging a consumer for a service or product under an agreement that is no longer in effect, (4) offering free or reduced-price products or services to the consumer without disclosing that acceptance commits the consumer to pay for other products or services, and (5) misrepresenting that failure to reject or return a delivery of a product or service obligates the consumer to pay for the product or service.

According to the state Ethics Board, no organization officially opposes the bill. However, some reservations have been expressed by the lawncare industry. They argue they are already regulated under other laws.

Do you have a position on AB 574? You can let your state legislator know by contacting the toll-free Legislative Hotline at 1-800-362-9472.

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