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
Washington State Office of the Attorney General
Pimsleur Approach Website
The views expressed in this posting are the author’s alone and not those of the blog, the host, or other weekend bloggers. As an open forum, weekend bloggers post independently without pre-approval or review. Content and any displays or art are solely their decision and responsibility.
15 thoughts on “Internet Order To Pay Million Dollar Penalty For Alleged Negative Option Trap”
Crap! I’m still getting book of the month billings for an innocent mistake I made in 1958.
What? No lawyers here who can answer my question, even if it is boring? 😀
I figure I will just keep the $5.50 and hold it until some legal outfit sends me a bill…upon which I will send them the $5.50 and stipulate the bill paid in full 🙂
“Class Action” suits are strange. I recently received a check for $5.50 from Murr V. Capitol One Settlement Fund. Thing is I never sought nor joined any class action list against Capitol One, a bank I have no quibbles with….they’ve always given me great support and service. So how’d I get on that list?
IANAL so did I make it on the list because once a class action is initiated on a given issue, are all customers made party to it without asking? Sounds like a Tort Chaser’s dream system.
I actually fell for this scam. I saw an ad that said I could get an intro cd for $10; they gave me a choice of several popular foreign languages. I thought that if I liked the cd, I could sign up for additional lessons at additional cost. Then they started debiting my credit card for lessons I didn’t request. I called them and they said I had agreed to a contract. I cursed myself, but thought that I should have been more careful, and that if I didn’t pay my credit would be damaged. So I ended up paying about $250. Expensive lesson! But based on this settlement, I’m thinking of taking them to small claims court. The ruling doesn’t involve my state so I will have to see if we have similar consumer protection laws. I would imagine the company would rather refund my $250 than litigate a possible class action from an additional state. I don’t want to be part of a class action. The only ones who benefit are the attorneys and the state. Years ago we were on vacation and a tire blew out. It was covered by warranty, so we went to the chain tire store and bought a new one. It blew out also, several hundred miles later. Eventually there was a class action, and our “payment” was a coupon for 20% off a new tire from the same store!
Agreed on the give me your account numbers gambit…I’ve actually used that from time to time. Always works to get the cretins to go away.
Jesus, use your common sense and read the fine print. If you’re stupid enough to buy this ship then suffer the consequences.
Now if only the AG can take on Kathy from Card Services of America…
Same page, when something gets screwed up, large and reputable firms will go to bat for you. My bank will chase down unauthorized charges and reimburse my account. Pay Pal got hacked once and both they and the game seller that the unauthorized charges went through got right on it. There are hackers out there and the only ones that will represent you are the ones making so much money because they offer back up.
Never, never, give out info, credit card numbers, etc when promised something free. Nothing’s free. Even the USPS is used by hackers. I usually explain to them in Swahili, Russian, or Hindi that I will give them my bank account number if they give me theirs first.
Issac … I agree, use PayPal whenever you can, and be suspect of those Internet merchants who do not accept PayPal. The best part of PayPal is that you do not have to provide a lot of personal information and credit card numbers to a merchant….and you can have actual and fairly prompt recourse via PayPal if something is not right. Same applies to solicitations for “donations”…no PayPal and I am suspect and unlikely to respond. The thing is that for a merchant PayPal is the easiest route to take, far less record keeping for the merchant, so why doesn’t a merchant or solicitor use it?
Actually I use PayPal for most regular periodic payments or contributions, such as to my local animal (no kill) shelter. Chase Bank also offers a periodic payment system where there is no control by a merchant or other receiver to add to the payments…but PayPal is easier. Simple as that.
That really smart, serious expression on his face just totally had me convinced he is wise and trustworthy!
There is an argument for ‘let the buyer beware’. One simply does not give out a credit card number unless one is absolutely sure of the terms. The tenacity of these companies is sometimes almost unbelievable. They can work with your bank to debit your account. The banks protect the companies, not so much the individual. They can mess with a customer’s credit score and can do permanent damage to one’s credit.
When our son was born we received as a gift a subscription to a well known book of the month club. Soon other stuff started coming in the mail, dolls, etc, stuff that was not ordered and not designed for boys. We sent it back and notified the company to stop all deliveries. They went through every conceivable threat and action to get us to pay until we filed a complaint with the appropriate authorities in the state where they were positioned.
The people we talked to at the company were disgusting. The officers of the state departments were tired of hearing it. The answer is, do not do business with any ongoing deal, pay through a reputable firm like Pay Pal where there is some recourse. A company will not mess with Pay Pal.
They should start putting the CEOs of companies who engage in consumer abuse in jail. While class actions do have some impact, most of the corporations who use this and other consumer abuse approaches will never be sued. I applaud the State of Washinton.
I have filed for a claim for at least 5 of these class actions and not received at penny. I expect the state will figure out a way to keep the million.
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