Fw: Attorney General's Consumer Bulletin

----- Original Message -----
From: "AGNews" <AGNews@oag.state.fl.us>
To: "AGNews" <AGNews@oag.state.fl.us>
Sent: Wednesday, April 19, 2006 3:49 PM
Subject: Attorney General's Consumer Bulletin

>
>
>
>
> This Month's edition of the Attorney General's Consumer Bulletin is
> now available for subscribers.
> Please click the web address below to view the current issue.
> April 2006:
> http://myfloridalegal.com/NewsBrie.nsf/OL/JFAO-6NZL3Y
>
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> Crist or the Attorney General's Office. This email address cannot
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> and use the convenient Contact Form provided there. Thank you.
>
> The text version of the Consumer Bulletin is below.
>
>
> YOURS FREE! NOT!
>
> Who can resist something that’s "FREE!"?
>
> Especially if it’s "NO RISK!" And "NO OBLIGATION!"
>
> People who promote products -- especially subscriptions -- love these
> terms. A colorful direct mailing from a magazine publisher can easily
> include the word "FREE!" dozens of times, as in "FREE GIFT!"
> "FREE LOOK!" "YOURS FREE!" and "ABSOLUTELY FREE!"
>
> In fact, "free" is used so extravagantly that Florida adopted a law
> limiting what marketers can say about it. As for "no risk" and "no
> obligation," marketers battle constantly with government agencies
> over whether these beloved claims aren’t just big fibs.
>
> What’s behind the lavish "free" offers is a popular sales technique,
> used not only to sell books and magazines but, more and more, a wide
> range of other products.
>
> It’s known as a "negative option" or -- as marketers sometimes call
> it -- "automatic renewal" or "advance consent marketing." At least
> 30 percent of magazines now use negative options.
>
> "They’re a very big deal," said Assistant Attorney General Victoria
> Butler. "This is what [marketers] are aiming for, that subscriptions
> go on indefinitely."
>
> Until recently, most subscriptions were easy to understand. You
> signed up for a year and when the year was nearly up the magazine
> would ask if you’d like to renew for another year. But that approach
> didn’t bring in as much revenue as publishers wanted.
>
> So they borrowed a technique dating back to the 1920s and the creation
> of the Book of the Month Club, in which members get books on a regular
> schedule. You get the product unless you tell the publisher in
> advance that you don’t want it. And you have to pay for it.
>
> That’s the negative option, and it’s perfectly legal in Florida -- as
> long as marketers abide by certain rules.
>
> The key question -- and the subject of myriad lawsuits, investigations
> and multi-million dollar settlement agreements -- is whether the
> consumer who gets the bill consented to the arrangement. If the
> consumer didn’t, then the publisher violated laws against deceptive
> and unfair trade practices.
>
> CRACKDOWN ON NEGATIVE OPTIONS
>
> In March, the Florida Attorney General’s Office reached an $8.8
> million agreement with Time Inc., which switched subscribers from
> fixed-term subscriptions to automatic renewals starting 10 years ago.
> Trouble was, Time failed to let them know properly that they would
> have to cancel in order not to have their subscriptions renewed, and
> went on to send subscribers dunning letters if they didn’t pay up.
>
> If Time had subscribers’ credit card information, it charged them for
> the extended subscriptions without their approval. (Time has denied
> any wrong-doing.) Under the agreement, Time will have to notify
> subscribers of upcoming automatic renewals and of their right to
> cancel. The company is also prohibited from mailing out promotions
> that look like bills.
>
> Instead of switching existing subscribers, other publishers lure new
> customers into negative options with tempting offers, usually of free
> products or products at virtually no cost. Their promotional
> materials often don’t make clear that by accepting the free or
> inexpensive product, a deluge of additional products will be arriving,
> and the customer may be obliged to buy them.
>
> For instance, Scholastic Inc. used free books to sign up subscribers.
> The children’s book publisher paid the Federal Trade Commission
> $710,000 last year for failing to disclose adequately that the "free"
> product could launch a long-term commitment. The company has also
> faced litigation from consumers over "free" Barbie dolls that initiate
> subscriptions.
>
> In 2001, the publisher of "Southern Living" and "Martha Stewart
> Living" agreed to pay the state of Florida $250,000 for not telling
> consumers adequately that buying one book would lead to getting series
> of books. And in 2004, the state received $250,000 from the publisher
> of crafts magazines including "Crochet World," following an
> investigation into "free trial" offers.
>
> So when is a negative option all right -- or against the law? If it
> kicks off with a free product, Florida law says marketers must make
> all conditions of the offer and obligations it might entail "clear and
> conspicuous" to consumers.
>
> In many negative options, as the Book of the Month Club pioneered,
> publishers tell customers about what magazines or books it proposes to
> send and, unless the customer says otherwise, goes ahead and sends the
> product and a bill.
>
> The Federal Trade Commission says that before a publisher can sign
> customers up for this kind of plan, the terms of the subscription must
> be "clear and conspicuous."
>
> With the Time agreement, rules were made for the first time on
> negative options in which the publisher just keeps sending out
> products without warning customers in advance about each mailing.
> "I believe it’s very significant," said Butler, because now Time is
> supposed to disclose whether subscriptions would continue
> automatically.
>
> The agreement was between the publishing company and 23 state
> Attorneys General. Florida led the multi-state investigation and
> settlement negotiations.
>
> PUTTING MARKETERS ON NOTICE
>
> Although the requirements in the Time agreement don’t have the force
> of law, they put marketers on notice of what state governments
> require, and marketers who run afoul of the new standards might face
> legal action. Again the standard is that marketers must disclose
> consumers’ obligations in a "clear and conspicuous" way.
>
> Will this solve consumers’ problems with negative options? Maybe.
> Maybe not.
>
> After all, marketers are creative people. Ever notice little stickers
> that are supposed to be pasted on mail-in postcards to get a free
> item? They might say something like "YES!" and would be placed next
> to "Sign me up for your offer!"
>
> At least one publishing company is arguing that if a customer reads a
> mailing carefully enough to know she must move the sticker, well, then
> the terms are clear and she knows what she’s getting into.
>
> The Time Terms
>
> More than 108,000 eligible consumers will share $4.3 million for
> magazine subscriptions that were automatically renewed between 1998
> and 2004. Among this group are approximately 10,600 Florida consumers
> who may be eligible for refunds totaling $392,000.
>
> Over the next three months, Time will send refund letters and claim
> forms directly to potentially eligible consumers with instructions on
> how to apply for refunds.
>
> The 23 states that worked on the investigation will receive $4.5
> million in costs and fees, of which Florida, the investigation’s
> lead state, will get $1.1 million.
>
> When is an offer too good to be true?
>
> Here’s how to protect yourself from negative options.
>
> If you see an offer of a free or low-cost product -- such as five CDs
> for only 49 cents -- be sure to examine the fine print, even if you
> see words like "RISK FREE OFFER" or "BUY ONLY WHAT YOU WANT."
>
> The fine print will probably say something like, "If you want our next
> selection, do nothing! It will be shipped to you automatically. If
> you don’t want it, simply check the appropriate box on the order card
> and mail it back to us."
>
> Translation = if you accept the discounted product, keep an eye out
> for further notices in what appears to be junk mail. Be sure to
> decline any further offers of products that you don’t want, or they
> will be sent to you and you may be obliged to pay for them.
>
> Remember, in this game, not saying no means yes!
>
> Sometimes the promotional material will describe a subscription in
> this way: "As a member, I need only buy five more in the next two
> years." Beware!
>
> This doesn’t mean you get to choose which five. Again, you will be
> sent offers of products you may not want and, unless you decline to
> receive them, they will be sent to you.
>
> The easiest way of dealing with negative options may be not to accept
> the discount offer in the first place.
>
> FIRST RESULTS IN SWEEPING PRICE-FIXING PROBE
>
> A major insurance company will reform its practices under a settlement
> agreement reached as part of a comprehensive investigation by the
> Florida Attorney General’s Office into bid-rigging and price-fixing
> in the insurance industry.
>
> Zurich American and affiliated companies promised that brokers with
> whom they do business will disclose arrangements they have with the
> Zurich companies, and Zurich will repay $151.7 million to
> policy-holders.
>
> "Twenty years down the line, this will still be reaping benefits,"
> because the agreement requires that information previously secret will
> become known to insurance consumers, said Assistant Attorney General
> Christopher Hunt.
>
> Zurich was one of many insurance companies and brokers under
> investigation for conspiring to steer business to particular carriers
> in violation of antitrust laws.
>
> Zurich is a major player in the insurance industry, and the reforms it
> adopts may influence practices across the board, Hunt said.
>
> The settlement announced March 19 was the first in a far-reaching
> investigation by the Attorney General.
>
> A lawsuit was filed March 14 against Marsh & MacLennon Companies
> alleging that the brokerage house engaged in anti-competitive
> practices.
>
> The Attorney General has issued 50 subpoenas to carriers, brokers,
> consultants and agents.
>
> The Zurich insurance companies -- which offer insurance to government
> entities and commercial companies -- are believed to have worked with
> other carriers and brokers to channel business in a way that raised
> premiums for policy-holders.
>
> "Competition was significantly reduced," Hunt said.
>
> Investigators are looking into whether, when would-be policy-holders
> asked brokers to find insurance coverage, brokers and carriers have
> worked together to simulate a bidding process, brokers would get
> kickbacks and carriers would take turns providing coverage.
>
> The result would be higher prices for policy-holders.
>
> Florida was a lead state in the settlement with Zurich, in which eight
> other states participated. The Zurich companies will pay the states
> $20 million in investigative costs.
>
> TIPS ON GETTING A MORTGAGE
>
> Shop around and compare. Compare interest rates and find out what the
> total cost will be, as well as your mortgage payment.
> Negotiate. Don’t agree to a loan that includes extra products you
> don’t want.
> Be cautious. If the loan seems too good to be true, it probably is.
> Never act immediately. Say "no" to lenders who ask for upfront fees
> allegedly to cover a first loan payment and other expenses as part of
> the application.
> Understand the terms of your loan. Make sure you know the dollar
> amount of each monthly payment and ask if the monthly payment can
> change at any time during the repayment process.
> Don’t be afraid to ask questions. You have a legal right to know the
> total cost of the loan, the annual percentage rate (APR), the monthly
> payments and how long you have to pay back the loan.
> Read carefully before you sign. Don’t sign any document you have not
> read or that has blank spaces to be filled in after you sign. Don’t
> be pressured into signing any loan papers that you do not understand.
> Borrow only the amount you need and can afford to repay. Just
> because you qualify for a certain amount of money does not mean you
> can afford to pay it back.
> Immediately get help if you feel you have been victimized. Contact
> your local Better Business Bureau to report the individuals and
> companies you worked with.
>
> - FROM THE FLORIDA ASSOCIATION OF MORTGAGE BROKERS. OTHER SUGGESTIONS
> AND USEFUL LINKS CAN BE FOUND AT www.famb.org.
>
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