April 15, 2002
Measures Will Require Consumers to Give Permission Before Being Billed
(SACRAMENTO) – Attorney General Bill Lockyer, joined by Assemblywoman Ellen M. Corbett, Assemblyman Darrell Steinberg and Shelley Curran of Consumers Union, today announced the introduction of two bills to protect consumers from deceptive telemarketers and direct mail solicitors who charge consumers for services and products without first obtaining their permission.
“Consumers often are led to believe that they agreed to try a product or service at no cost, but later discover they were billed after the ‘free-trial’ period was over, even though they never gave their credit card or other account numbers to the telemarketer,” Lockyer said. “It’s frustrating when a consumer is interrupted by annoying phone calls during dinner; it should be criminal when they are tricked into purchasing something they didn’t even know they bought.”
The two measures will prohibit telemarketers and direct mail solicitors from charging consumers unless the consumers expressly consent to the purchase of the product or service being sold and provide their billing information to the telemarketer or direct mail solicitor.
“It is crucial that consumers have control over their private, financial information,” said Corbett, D-San Leandro. “These two bills will help empower consumers and ensure they are only billed for those purchases they’ve actually approved.”
“Because the consumer has not provided the telemarketer with his or her billing information, they are led to mistakenly believe that they have only agreed to try a product or service at no cost and with no risk,” said Steinberg, D-Sacramento. “In reality, the telemarketer is able to charge the consumer for the product, and once that trial period is over, the charges start racking up.”
Sponsored by the Attorney General and Consumers Union, AB 2578 and AB 2775 seek to address problems regarding the ability of telemarketers and direct mail solicitors to enter into agreements with a bank that allow the vendor to sell products or services without obtaining a consumer’s billing information.
Under these arrangements, the vendor simply informs the bank that the consumer bought the vendor’s product or service, and the charge then appears on the consumer’s credit card or other account. In virtually every transaction of this type, consumers are unaware that the company has the ability to charge their accounts. Often, consumers do not receive documents informing them that their account will be charged. In other cases, the information is sent, but because it appears to be unsolicited junk mail, consumers toss it in the trash.
Another practice that has sparked complaints from consumers involves phone and mail solicitations offering free products, services or memberships to consumers, sometimes in connection with another sale for which the consumer authorized his or her account to be charged. In these cases, the vendor fails to tell consumers that unless they cancel the service after the free-trial period, they automatically will be charged.
“It is outrageous that telemarketers and direct mail solicitors are charging consumers without getting their express consent under the pretense of providing a product on a free, introductory basis,” said Curran, policy analyst with Consumers Union’s West Coast regional office. “This kind of scam should already be illegal but, incredibly, it is not. These bills will help fill that gaping hole.”
AB 2578, by Corbett, would regulate these sales practices by direct mail; AB 2775, by Steinberg, addresses problems with telemarketers. The Attorney General’s Office and other law enforcement and consumer protection agencies have received numerous complaints during the past two years from consumers who discover they’ve been charged for purchases they did not authorize or did not realize they had made.
California consumers who believe they have been unfairly charged are urged to file complaints with the Attorney General’s Public Inquiry Unit by phone at (800) 952-5225 or by e-mail at http://ag.ca.gov/consumers/mailform.htm.
Consumers Union, 415-431-6747
Hallye Jordan, AG’s Office: 916-324-5500
Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.