Continuity or Negative Option Plans\u00a0<\/span><\/strong>
Continuity plans are those that have continuous subscriptions or automatically renewed payment for services. Continuity plans are also called negative option plans. The term negative option plan is used because you remain on the plan and billed for the products and services until you specifically opt out. This can be a problem if you don\u2019t inform them that you don\u2019t want their Elvis special or continue to get billed while waiting for them to process the cancellation.\u00a0<\/span>
Continuity plans started to receive heavy FTC oversight when people began complaining about ten CDs for a dollar deals that turned into a $20 a month plan that they could not cancel. This is in addition to the ongoing complaints that people were forced to pay for something they did not want or only received refunds after they mailed back the item.\u00a0<\/span>
The key feature of continuity plans is that the charges are either automatically renewed indefinitely or continue for a specified, predetermined time.\u00a0<\/span><\/p>\n
Membership sites may charge for membership or be free. Many manufacturers have free membership sites while marketing to members and increasing their sales by promoting special offers to members. Membership sites may charge an annual fee to remain a member or charge for a premium level of membership or services. For example, the basic access to LinkedIn is free, but the premium version popular with jobseekers requires payment. Many gaming sites are membership sites. A few games may be free, but paid membership is required to access most of the games. One definition of a membership website is that the website is the destination and product. Mistakes those setting up memberships make include lacking content, charging too much for the limited content and not having a plan to make money off their marketing to members.\u00a0<\/span><\/p>\n Subscription sites may offer content only to those who sign up. However, subscription sites tend to offer more than the online content. They may be able to download PDFs not available on the website or receive print newsletters in addition to online content. Subscription based sites are commerce based, specifically designed to increase product sales and provide a service to subscribers.\u00a0<\/span><\/p>\n Software as a service is any software for which the consumer must make regular payments to continue using the software. Adobe triggered an uproar when it switched to the Software as a Service or SaaS model. No longer could someone buy an Adobe CD and install the software, owning it forever. Now they had to pay an annual or bi-annual fee to Adobe to use software they\u2019d always used. IT firms like SaaS because it generates a continual income stream. They also say it makes new software rollouts simple because only the software app on the cloud has to be updated.\u00a0<\/span> Nominal Fee to Pay Offers<\/span><\/strong> California\u2019s SB 340 is similar to ROSCA, but there are a few differences. The challenge for online entrepreneurs and internet marketers is how to comply with both laws.\u00a0<\/span> By now it should be clear how important it is for you to be FTC compliant. But how can you do that without spending $7,500-$8,000 or more on Internet Attorneys?<\/p>\n Smart business owners around the world are doing it with the help of FTC Guardian.<\/p>\n FTC Guardian is a service that is 100% focused on helping to keep you get and stay FTC compliant and fully protected.\u00a0And right now, we are offering a free training to give you the knowledge, information, and guidance that you need to stay out of trouble with the Federal Trade Commission.<\/a><\/p>\n![](\"https:\/\/s3.amazonaws.com\/ftcguardian\/images\/728x90-Un-vjy-FTC-GUARDIAN-banner-2.gif\")
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You might think you aren\u2019t subject to these rules because you aren\u2019t selling CDs for a penny now to overcharge someone for CDs for the next three years. However, continuity programs take many forms, including several models used by internet marketers and online entrepreneurs.\u00a0<\/span>
Common types of continuity plans used by online businesses include:\u00a0<\/span><\/p>\n\n
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Continuity Plans and ROSCA\u00a0<\/span><\/strong>
ROSCA or the Restore Online Shopper\u2019s Confidence Act of 2010 was passed in response to consumer complaints of internet scams in the form of continuity plans. ROSCA contains three main rules for continuity plans:\u00a0<\/span><\/p>\n\n
The FTC enforces the provisions of ROSCA, and violations of the act are treated like unfair or deceptive marketing practices.\u00a0<\/span><\/p>\n![\"\"](\"\/images\/button_banner-Big_Data_Report.png\")
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The FTC has been busy enforcing ROSCA. In one case, the FTC settled for $359 million dollars, while the other was litigated with a penalty of $18 million. Both of these ROSCA cases involved nominal fee to pay offers. Consumers in both cases signed up in response to an offer with a low cost item, usually only the cost of shipping and handling for the first item. However, paying for shipping and handling gave the company the customer\u2019s credit card information.\u00a0<\/span>
After the free trial or free with shipping item sent, the initial offer was followed by an upsell. And when the free trial was over, the consumer\u2019s credit card was regularly charged until the customer cancelled the offer.\u00a0<\/span>
Lesson: If you are going to set up a nominal fee to pay offer, then your nominal fee offer as well as the upsell must have the required ROSCA disclosures.\u00a0<\/span><\/strong>
The Federal Trade Commission has clearly stated that even if the consumer is informed later or if the consumer accepts the nominal fee offer, it is considered a deceptive marketing practice if ROSCA disclosures are not provided with the call to action.\u00a0<\/span>
California SB 340 \u2013 California False Advertising Act<\/strong>\u00a0<\/span>
SB 340 amends the California False Advertising Act, addition new requirements to that state\u2019s laws on continuity plans.\u00a0<\/span><\/p>\n\n
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Note: If you offer a continuity plan and accept customers from California, you must meet both ROSCA and SB340.<\/strong>\u00a0<\/span>
Recommendations to Avoid Being Creamed by Continuity Programs<\/strong>\u00a0<\/span><\/p>\n\n
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What Happens if You Violate ROSCA or SB 340?\u00a0<\/span><\/strong>
What are the penalties if you violate ROSCA or California\u2019s SB 340?\u00a0<\/span><\/strong>
\u2022 FTC penalties for ROSCA violations are up to $16,000 per violation.\u00a0<\/span>
\u2022 California\u2019s penalties can reach $2,500 per.\u00a0<\/span>
Summary\u00a0<\/span><\/strong>
Membership websites are popular because they provide a continual source of income from members. Unfortunately, this revenue stream has been so badly abused by scammers that the Restore Online Shopper\u2019s Confidence Act and California\u2019s SB 340 were passed. Continuity plans are now a highly regulated industry, and the price for non-compliance is high.\u00a0<\/span><\/p>\n![\"Learn_More\"](\"http:\/\/www.ftcguardian.com\/articles\/wp-content\/uploads\/2014\/07\/Learn_More.jpg\")
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Here\u2019s How To Make Sure You,\u00a0Your Business & Website Is FTC Compliant<\/h2>\n