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Negative option plan

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Definition Edit

Under a negative option plan,

a consumer agrees to receive various goods or services from a company for a trial period at no charge or at a reduced price. The company also obtains, sometimes through misrepresentations, the consumer's credit card or debit card number. If the consumer does not cancel before the end of the trial period, the shipments of goods or the provision of services continue, and the consumer incurs recurring charges.[1]

Overview Edit

"The EFTA and Regulation E prohibit companies from debiting consumers' bank accounts on a recurring basis without obtaining proper written authorization for preauthorized electronic fund transfers and without providing the consumer with a copy of the written authorization."[2]

"Negative options plans can involve the use of debit cards, credit cards, or both. EFTA and Regulation E apply to debit cards; the TILA and Regulation Z apply to credit cards."[3]

References Edit

  1. Federal Trade Commission Enforcement Activities Related To Compliance With Regulation B (Equal Credit Opportunity), Regulation E (Electronic Fund Transfer), Regulation M (Consumer Leasing), and Regulation Z (Truth in Lending) During 2012, at 10 (May 2013) (full-text).
  2. Id.
  3. Id. at 10 n.37.

See also Edit

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