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Rewards Programs Snare the Unwary

"Free trial" programs can lead to unauthorized charges

By Mark Huffman
ConsumerAffairs.com

November 3, 2008
You're completing an online purchase and up pops a box with a great offer. "Save $10 on your order," it says. You think, "Hey, I'd like to save 10 bucks," so you click the link.

Big mistake.

Unless you clearly read all the fine print in the disclaimer, you might not realize that you have just enrolled in a "rewards program," which offers discounts on a variety of services that you might never use. After a short, "free trial" period, you have agreed to pay for "membership" in this program each month.

How can they charge you for something you don't want? Because you just gave them your credit card billing information. By accepting the $10 discount on your purchase, you agreed to enroll in the program and allow the company that administers the rewards program to debit your credit card each month.

David, of Baltimore, fell into this trap when he ordered some flowers from 1-800Flowers.com.

"I clicked on a "save $5.00 off your order" coupon and ended up getting charged $11.99 for the next 6 months by this Livwell," he told ConsumerAffairs.com. "1-800Flowers gave them my credit info and I think by the amount of complaints I have read 1-800 should be held responsible for this."

Some consumers, like Yasmeen of Hillside, New Jersey, realized they were signing up for a rewards program, but never expected to be charged for anything, because it was presented as a limited time, free offer.

"I only signed up for the FREE rewards program and receipt of promotions," she told ConsumerAffairs.com.

Ah, but that's not the way it works. A closer reading of the disclaimer would have revealed that the free trial period turns into a paid membership unless the consumer takes action to cancel the membership. But like Yasmeen, many consumers falsely assume the membership will expire at the end of the trial period.

This arrangement is known as "pre-notification negative option." It means that the responsibility falls on the consumer to take action to notify the company it does not want to continue the relationship.

Over the years many marketers have abused this arrangement, often charging consumers without giving them any notice they were enrolling in a rewards program, or hiding the information in fine print. Many became ensnared in these programs simply by clicking on pop-up ads.

The Federal Trade Commission is supposed to control these activities through its Prenotification Negative Option Rule.

"The Rule requires companies to give you information about their plans, clearly and conspicuously, in any promotional materials that consumers can use to enroll," the agency says. "If the sales presentation for a plan is made orally, say on the phone, the terms and conditions still must be disclosed clearly and conspicuously during the presentation."

For example, companies must tell you whether there's a minimum purchase obligation; how and when you can cancel your membership; how many announcements and rejection forms you'll receive each year, and how often you'll receive them; how to reject merchandise; the deadline for returning the rejection form to avoid shipment of the merchandise; and whether billing charges include postage and handling.

Some customers of online printing company VistaPrint have also complained of unexpected charges on their credit cards after placing an order.

"I ordered invitations from VistaPrint in June of 2008," Lisa, of Oswego, New York, told ConsumerAffairs.com. "Beginning in July I noticed a charge from Shopper Discounts that I had not authorized."

Most companies say they do not purposely try to trick consumers into joining their rewards programs. After a number of complaints about Vista Print appeared on ConsumerAffairs.com, the Web site received a note from Jeff Esposito, who identified himself as a VistaPrint public relations representative.

"On behalf of VistaPrint I am sorry you feel you've had a negative experience with our rewards program," he wrote. "VistaPrint believes that the vast majority of our customers who sign up for the program really enjoy the benefits, but if you are not happy, please call 866.870.4124 and we'd be happy to process a refund. We're open from Mon -- Fri 8 am -- midnight EST."

Honest mistakes do happen. But consumers who believed they did not knowingly authorize a charge on their credit card for enrollment in any kind of rewards plan should contact their credit card company and report it as an unauthorized charge. Unless the company that charged your card can produce a "proof of purchase," the credit card company can deny payment.

The lesson for consumers is to be very leery of online promises of anything "free." These promises almost always come with strings attached, requiring you to spend more money. Otherwise, how could they afford to give things away?

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