A bill to protect online shoppers from bait-and-switch scams was approved Wednesday by the U.S. Senate. The measure is aimed at a practice called "post transaction advertising" that has bilked millions of Americans of billions of dollars by secretly subscribing them to services without their consent.
"This is a victory for American consumers," declared Sen. John D. (Jay) Rockefeller (D-W. Va.) in a statement. "This bipartisan legislation provides new standards that make sure businesses can't bill online shoppers for services they did not want to buy."
The legislation was drafted after an extensive probe by the Senate Commerce, Science and Transportation committee, which Rockefeller chairs.
"Last year, the committee learned that unscrupulous businesses used offers of rebates and rewards as a smokescreen to pick the pockets of millions of online shoppers," he said. "It's not the way business should be done in America and it will end. We're slamming the door on this billion dollar scam."
The sales tactic, used by companies like Affinion, Vertue and Webloyalty, works like this. Following checkout after buying something at a website, a shopper is offered some kind of perk--free shipping or a cash rebate. When the shopper accepts the offer, they're automatically enrolled in some kind of subscription service without their knowledge and their credit is charged for it.
The tactic works because hundreds of shopping sites were willing to share their customers' billing information with the companies for a cut of the action.
Under the bill, called the Restore Online Shoppers' Confidence Act, the following protections would become law:
- Companies would be prohibited from using misleading post-transaction advertisements by requiring them to clearly disclose the terms of their offers, and to obtain billing information, including full credit or debit card numbers, directly from consumers.
- Internet retailers and other commercial websites would be prohibited from transferring a consumer's billing information, including credit and debit card numbers, to post-transaction third party sellers.
- Companies that use negative options" on the Internet would be required to meet certain minimum disclosure and enrollment requirements, so consumers will not end up paying recurring fees for goods and services they did not intend to purchase.
The bill now goes to the House for action.