The practice of inserting third party services with recurring billing into a transaction has drawn the attention and anger of federal and state regulators. To address this concern, the federal Restore Online Shopping Confidence Act (“ROSCA”) was recently enacted. The primary purpose of this law is to protect consumers from deceptive data passing among merchants.
One form of deceptive data-passing among merchants is when consumers unknowingly authorize a merchant to transfer his/her payment information to another merchant for a separate online sale without requiring the consumer to reenter his/her payment information and consent to the third party transaction.
To address this concern, ROSCA has two principal provisions to protect consumers, which are:
(1) ROSCA requires third party sellers to disclose to consumers the terms of their offer, and the fact that the third party seller is not affiliated with the merchant.
(2) ROSCA also requires the third party sellers to obtain “the express informed consent” for the charge by obtaining the account number, name and address, and a means to contact the consumer directly from the consumer, and requiring the consumer to check the box or perform some other affirmative act to indicate his/her consent.
Only if both of the two requirements are met can a business pass data from it to another merchant. In order to meet these requirements, changes are most likely required in your “check out” process on your website.
Finally, ROSCA prohibits a business from charging or attempting to charge any consumer for goods or services over the Internet under which “the customer’s silence or failure to take an affirmative action to reject goods or services or to cancel the agreement is interpreted by the seller as an acceptance of the offer” (“Negative Option Feature”). There are legal ways around this prohibition that requires a business to (1) clearly and conspicuously disclose the material terms of the transaction before obtaining billing information; (2) obtain the consumer’s express informed consent before charging the consumer; and (3) provides “simple mechanisms” for a consumer to stop recurring charges.
ROSCA is primarily enforced by the Federal Trade Commission and the State Attorneys General, but the Act does not rule out private enforcement in civil litigation actions. Violators may be subject to the same penalties and are entitled to the privileges and immunities provided in the Federal Trade Commission Act.
As a business owner, if you are offering any third party services via your website, you will need to make sure that your “check out” procedures and disclosures are compliant with ROSCA. Additionally, there are similar state laws regulating reoccurring payments from goods or services purchased online. For example, automatic renewing charges to California consumers required that the (1) offer terms are presented in a “clear and conspicuous” manner, (2) a business may not charge the consumer’s credit card without the affirmative consent of the consumer, and (3) a business may not change a material term of the offer without “clear and conspicuous” notice of the change to the consumer. Under this California law, if a business sends goods to a consumer under an automatic renewal of a purchase or continuous service agreement without first obtaining the consumer’s affirmative consent, the goods are deemed unconditional gifts to the consumer, and the business must bear their entire cost.
If your website is offering third party services to consumers or has automatic reoccurring charges to its consumers, then it may make sense to conduct a legal website audit of your “check out” policies and disclosures to make sure that you are compliant with ROSCA. Otherwise, if your business website is not compliant with ROSCA, you may draw the attention of the Federal Trade Commission, State Attorneys General and civil plaintiff lawyers.
The Parents Estate Planning Law Firm, PC
