The Florida Attorney General's Office, which has begun investigating reports of unauthorized charges on consumers' credit cards in connection with “free” offers and gifts, has reached a $1.2 million settlement with a Maryland marketer.
The settlement with Encore Marketing International includes $1 million in restitution for consumers who submit appropriate claims. Consumers have complained that they enrolled in a membership program and then were charged recurring fees without authorization.
Florida Attorney General Pam Bondi says Encore is one of many companies that market club memberships in connection with the sale of goods and services. After consumers make online or telephone purchases of such goods and services, they are offered discounts or other incentives for becoming club members with companies such as Encore, a practice known as post-transaction marketing.
Violates Florida state law
The failure to disclose recurring fees associated with club memberships is a violation of Florida’s Unfair and Deceptive Trade Act.
“Consumers deserve to have a clear and prominent disclosure of any fees associated with a transaction, and we are committed to protecting Floridians from deceptive practices,” Bondi said.
Consumers who aren't aware of post-transaction marketing – often called “negative option” marketing, need to get familiar with how it works.
When completing a transaction with Company A, the consumer will get an offer of a free item or discount from Company B, usually through a pop-up. They accept it because they aren't aware that it will enroll them in a “club” that hits their credit card with a monthly fee.
In the dark
They are usually caught off guard because they have no idea that Company B already has their credit card information, having purchased it from Company A.
Florida has one of the tougher laws regarding this practice. Its Assurance of Voluntary Compliance with Encore requires the company to make clear and prominent disclosures about memberships in online offers and in telemarketing scripts. The company will establish a $1 million notification and restitution program for Florida enrollees and pay the Attorney General's Office $200,000 in fees and costs.
In addition to the settlement, Bondi said her office is continuing to investigate post-transaction marketing to ensure that proper disclosures are made. To protect themselves, consumers should review their bills for unauthorized charges. If consumers find suspicious activity, they should file a complaint with their credit card company's fraud department.
