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Negative Options

A negative option means a contract under which a supplier either:

  1. sends or offers to a consumer an announcement, advertisement, or notice that the supplier proposes to send goods or provide services to the consumer and the consumer is required to pay for those goods or services unless the consumer affirmatively communicates that the goods or services are not accepted; or
  2. sends or offers to a consumer a notice accompanying goods or services provided to the consumer that requires or purports to require the consumer to pay for those goods or services unless the consumer affirmatively communicates that the goods or services are not accepted.

A consumer transaction involving a negative option is unlawful in Utah unless it conforms with the Federal Trade Commission rule governing negative option plans codified at 16 C.F.R 425.1.  The FTC rule requires that negative option promotional material clearly and conspicuously disclose the material terms of the plan, including:

  • The aspect of the plan under which the consumer must notify the supplier, in the manner provided for by the supplier, if the consumer does not wish to purchase the goods or services;
  • Any obligation assumed by the consumer to purchase a minimum quantity of merchandise;
  • The right of a consumer to cancel membership at any time upon completion of the contract;
  • Whether billing charges will include an amount for postage and handling;
  • A disclosure indicating that the consumer will be provided with at least ten (10) days in which to mail any form to the supplier;
  • A disclosure that the supplier will credit the return of any merchandise to the consumer, and guarantee postage to return such merchandise to the supplier when the form is not received by the consumer in time to afford at least ten (10) days in which to mail the form to the supplier; and
  • The frequency with which forms will be sent to the consumer and the maximum number of forms which will be sent to the consumer during a 12-month period.

BEWARE!  Con artists commonly use negative options as part of their internet offers.  With the ability to pay electronically, the negative option has proven to be a big money maker for them.  They will offer a "free" item or some other promotion on the internet.  The catch is that the offer is conditioned on the consumer agreeing to the "terms and conditions" of the offer, which include a provision whereby the consumer's credit card or bank account will be automatically debited a certain amount each month until the consumer gives notice of cancellation.

 

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consumerprotection@utah.gov  |  160 East 300 South   Salt Lake City, Utah 84111  |  Phone: 801-530-6601  |  Toll-Free: 1-800-721-SAFE  |  Fax: 801-530-6001