By Darren Smith, Weekend Contributor
The Internet Order company, known for its product “The Pimsleur Approach” language software sold online, has agreed to pay a one million dollar fine to settle charges by the Washington Attorney General who alleges the company violated consumer protection laws by engaging in what is referred to as a Negative Option Trap.
Negative option billing, is the business practice of automatically billing a consenting consumer for products or services of which the consumer must pay or cancel in advance of delivery. Washington State law treats deceptive Negative Option Billing as a violation of the consumer protection act and also considers unsolicited goods delivered to a consumer to be gifts and the recipient has no obligation to pay.
The investigation began after an advertisement program offering to sell consumers a language instructional CDs for the introductory price of $9.95. Consumers complained that afterward they were unexpectedly billed for additional language CDs every sixty days for in some cases reportedly $64.00 each.
According to Assistant Attorney General Paula Selis, some consumers were billed for $256.00 each for multiple installments. The AG’s office believes there could be thousands of consumers who might have unsuspectingly received further installments that they did not express consent to receive. She commented:
“It was very clear from their advertising what they were attempting to do and they were successful. Because most people had no clue that they were signing up for these advanced level CDs and were going to get billed for them.”
The million dollar settlement is on behalf of all consumers in the United States, not just Washington. The Attorney General’s Office announced that consumers believing they may be a party to this claim can within a sixty day period file for damages with the state.
The AGO provided the following public statement:
FOR IMMEDIATE RELEASE:
Sep 1 2015
Internet Order to pay back over $1 million to consumers; Consumers encouraged to file a claim
SEATTLE — Washington State Attorney General Bob Ferguson announced resolution of a consumer protection enforcement action today against the company Internet Order and its CEO Daniel Roitman for unfair and deceptive practices. The Philadelphia-based online company was accused of using deceptive “negative option” marketing tactics to lure consumers into purchasing language instruction courses in violation of the federal Restore Online Shoppers’ Confidence Act (ROSCA) and the state’s Consumer Protection Act (CPA).
“Consumers have a right to know exactly what they’re purchasing and how much it will cost them,” said Ferguson. “If businesses deceive consumers and use unfair business tactics to make a profit off of Washington residents, I will hold them accountable.”
Internet Order markets and sells foreign language audio courses online under the brand name “Pimsleur Approach,” primarily via their website http://www.pimsleurapproach.com. Internet Order’s website and marketing promote the “Quick and Simple Course” with a low price “introductory offer” on a set of self-instruction CDs for “only $9.95.”
The “Pimsleur Approach” marketed by Internet Order is to be distinguished from other Pimsleur products sold by other retailers.
The lawsuit alleged that consumers who purchased the introductory set for $9.95 were unknowingly and automatically enrolled in a “negative option” purchase plan that obligated them to receive up to four advanced-level additional courses at a cost of $256 each for a total of as much as $1,024.
In order to avoid charges, consumers were required to ship the advanced-level courses back to the company at their own expense within 30 days. If they failed to do so, they were automatically charged $256 on the credit card they had used to purchase the introductory “Quick and Simple Course.” To make matters worse, the suit alleged that consumers who refused to pay were hounded with letters and threatened with collection agency action.
Internet Order was accused of:
- Failing to clearly disclose the terms of its negative option sales program.
- Failing to obtain agreement from consumers to sign up for the program.
- Failing to provide simple cancellation mechanisms as required by law.
- Making misrepresentations in its advertising.
- Using unfair collection practices.
These are violations of the federal ROSCA and the state’s CPA.
Internet Order must stop deceptive business practices
The action announced today is part of a multistate effort with the Attorneys General of Pennsylvania and New York.
Under terms of the enforcement action, Internet Order:
- Must clearly disclose the terms of any negative option sale, and must get consent from consumers before obligating them to the terms of the sale.
- Must repeatedly notify consumers of the terms of a sale.
- Must allow consumers to easily and effectively cancel an ongoing subscription in a negative option plan.
- Cannot charge any fee for the return of an item during a “free trial” period.
The enforcement action requires Internet Order to pay back over $1 million in restitution to consumers nationwide who were victims of its scheme.
Finally, Internet Order must pay the states of Washington, Pennsylvania and New York $288,000 of any future profits made from Pimsleur Language Learning sales made between July 2016 and June 2019. Washington’s share of this potential amount, $96,000, will help cover the costs of enforcing the Consumer Protection Act on behalf of Washington consumers.
Consumers encouraged to file a claim for restitution
Consumers who purchased language courses from Internet Order and believe they are victims should file a complaint with the Washington Attorney General’s Office at http://www.atg.wa.gov/file-complaint. If you have already filed a complaint, you do not need to file a new one.
Senior Counsel Paula Selis and Assistant Attorney General Patricio Marquez were leads on the case for Washington state.
The full text of the Consent Decree may be read HERE.
For a background of the state’s opinion relating to Negative Option Rules, a 2009 Letter to Federal Trade Commission Secretary Donald Clark, Former Washington Attorney General Rob McKenna wrote this Prenotification Negative Option Rule Review.
Immediately after the announcement of the settlement, on September first, your author retrieved information from the Pimsleur Approach website (www.pimsleurapproach.com) and noted the following statement prominently displayed:
All customers who ordered the 9.95 special offer were automatically enrolled in our Rapid Fluency Purchase Program. We are no longer accepting new orders into this Program.
By Darren Smith
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