The Disclosure Counts: the FTC Punishes Fine Print
As a small business owner facing a recession, it can be tempting to bury the disclosure information all the way at the end of a business contract or give customers difficulty with cancelling subscription or services. However, these tactics may not pay off with the FTC.
MediaPost reports that the FTC recently fined Commerce Planet because the FTC claims that the company lured in consumers to provide their banking or credit information for a short trial period of use for their products and then slammed their customers with monthly membership fees. The company also made it hard for consumers to actually cancel these memberships.
The FTC can get you because you need to actually put the disclosure language in a contract before the consumer signs off on the contract. In this case, the company placed the disclosure language "under the fold," at the bottom of the web page (with the consumer being able to agree without having seen the fine print).
Another issue that the FTC had a problem with was the billing model that the company used. It used a "continuity plan" (which is also known as a "negative option plan"). While this option is not illegal, it definitely upsets consumers and opens up your business to liability.
It is a billing model where goods or services are provided automatically, and the customer must either pay for the service or specifically decline it in advance of billing.
This type of billing can get small businesses into legal trouble if consumers do not fully understand the terms and conditions or if they have a hard time cancelling.
So just make sure that you put your fine print in the contract above the signature line and make the terms and conditions clear to your customers. It could save you trouble down the road.
Related Resources:
- Contract Terms Checklist (Findlaw)
- Consumer Scams FAQ (Findlaw)
- MAIL FRAUD AND UNORDERED MERCHANDISE (Findlaw)