Electronic Retailer - October 2011 - 14

iNDUStRY RePORtS

FtC Forum

X Checker
By LesLey Fair When people searching for short-term loans happened upon the sites posted by Swish Marketing – which claimed to match applicants with willing lenders – it seemed like a fix to their financial woes. Just answer a few standard questions about employment, income, references, etc. Even the request for bank account information seemed reasonable under the circumstances since payday lenders might use direct deposit to convey the funds. After clicking a button that said “Get matched for your payday loan!” up popped a page with “bonus offers” for a car loan, a credit repair service, computer equipment, and what appeared to be a credit card. Rather than ticking any of the radio buttons, most people just clicked “Finish matching me with a payday loan provider!” Or so they thought – because the circle next to the credit card offer had been pre-checked with a YES. Buried in fine print was the statement “You hereby authorize [the company] to debit your bank account for the one-time enrollment fee” of between $40 and $55 for what turned out to be a prepaid debit

it’s illegal to bind buyers without their express approval, and assent by silence won’t cut it.
card. Hundreds of thousands of people later learned that the company peddling the card had helped itself to the money out of their bank accounts – troubling under any circumstances, but dire for people already on the financial brink. The next chapter of the story shouldn’t come as a surprise. The FTC went to court to challenge the practices as deceptive, and the resulting multimillion dollar judgment will get money back to defrauded consumers. But other aspects of this case bear close consideration for online entrepreneurs. • A (pre-)checkered past. It’s illegal to bind buyers without their express approval, and assent by silence won’t cut it. Using a pre-checked box to rope consumers into a deal without their unequivocal OK is an engraved invitation to law enforcement. • The company you keep. In this case, the FTC filed suit against both the company offering the card and the web marketers promoting it through an affiliate arrangement. These days, it’s rare to find an FTC case where only one company is named. Online transactions routinely involve complicated arrangements of partners and affiliates – and the scope of the FTC Act is broad enough to cover almost anyone who plays a role in deception, including people on both sides of an affiliate deal. • Me, myself, and I. Think that “Inc.” after a business name means corporate officers are shielded if consumer refunds are warranted? Think again. In this case, the FTC complaint named the businesses and charged the affiliate marketers individually. Furthermore, the individuals were on the hook for the full amount of financial injury, even though they took in a lot less than that. One defendant turned over his current net worth and will be ponying up additional six-figure checks in the future. Another had to sell his house to pay for refunds. A third – the technology officer – coughed up $850,000. Looking for more on how online retailers can stay off the FTC radar? Visit business.ftc.gov. Lesley Fair is an attorney with the FTC’s Bureau of Consumer Protection.

electronicRetaileR | October 2011

Electronic Retailer - October 2011

Table of Contents for the Digital Edition of Electronic Retailer - October 2011