for Consumers

Prenotification

Negative

Option

Plans

FTC FACTS

PRODUCTS

1-877-FTC-HELP

FEDERAL TRADE COMMISSION FOR THE CONSUMER

www.ftc.gov

ou see the ads on TV, in magazine and

newspaper inserts, and on the Internet: ì5 Books for $1,î

ì10 CDs for FREE,î or ì4 Videos for 49¢ each.î By joining

some of the clubs that are offering these deals, you may become

a member of a ìprenotification negative option plan.î That means you are

agreeing to receive merchandise automatically unless you tell the club not to

send it.

How Prenotification Plans Work

Often, you can join a plan simply by accepting an introductory offer of some

merchandise, often at a discounted price. Then, you pay full price for additional

merchandise.

Joining a plan means you agree to the planís sales method as long as youíre a

member. As a plan member, you will receive periodic announcements describing merchandise that you can buy. These announcements are important because

the merchandise is sent to you automatically unless you return the form rejecting

the offer within the specified time.

Y
Facts for Consumers

Each time you receive an announcement, you

have two choices:

presentation. For example, companies must

tell you:

✔ whether thereís a

minimum purchase

obligation;

✔ how and when you

can cancel your

membership;

✔ how many announcements and rejection

forms youíll receive each year,

and how often youíll receive them;

✔ how to reject merchandise;

✔ the deadline for returning the rejection form

to avoid shipment of the merchandise; and

✔ whether billing charges include postage and

handling.

Minimum Purchase Obligations and

Canceling Memberships

Some plans require that you buy a certain

amount of merchandise at the clubís regular

prices. If thatís the case, the minimum purchase obligation must be disclosed clearly and

conspicuously. Once youíve satisfied the

minimum purchase requirements, you can

cancel your membership. If the club has no

minimum purchase obligation, you can cancel

your membership any time.

If you want to cancel your membership, send

your request in writing. The company must

cancel your membership promptly. If the

company sends additional merchandise after

receiving your written cancellation notice, you

need to return the first item that is sent. You

may consider any additional shipments as

unordered merchandise and keep them as a gift.

However, to avoid dunning notices, itís best to

tell the company that youíre no longer a member each and every time you receive unordered

merchandise. You can do that by sending the

company a copy of your cancellation letter.

The Prenotification Negative

Option Rule

The Federal Trade Commission (FTC) enforces

the Prenotification Negative Option Rule. The

Rule requires companies to give you information about their plans, clearly and conspicuously, in any promotional materials that consumers can use to enroll. If the sales presentation for a plan is made orally, say on the

phone, the terms and conditions still must be

disclosed clearly and conspicuously during the

OR

B. If you donít want the merchandise, you

must say so and return the rejection form

included with the announcement within a

specified time, usually 10 days. Make sure

you follow the instructions on the form.

Some plans also let you use the rejection

form to order other merchandise.

A. If you want the merchandise, do nothing.

It will be sent automatically. Some plans

require you to pay for the merchandise

when you get it. Other plans send the

merchandise ìon approval,î which means

you can try it for a specified period. If

you return the merchandise, you donít

have to pay for it.
Facts for Consumers

Announcements and Rejection

Forms

The company must tell you how often and how

many announcements and rejection forms youíll

receive each year and how often you will

receive them. The company also must tell you

whether billing charges for each item include

postage and handling.

The rejection form comes with, or is a part of,

the announcement. In some plans, the rejection

form can be used to decline merchandise and to

choose a different item. The announcement

must give you at least 10 days to decide if you

want the merchandise and mail back the form.

The form includes a ìreturn dateî ó the date

the form must be received by the company, or

a ìmailing dateî ó the date you must mail the

form to the company. No matter which date the

company uses, you have at least 10 days to

respond.

If you donít get at least 10 days, and you

receive an unwanted shipment, you can return

the merchandise to the company for a full

credit to your account. The company must pay

for the return postage.

Bonus Merchandise

To attract new members, some companies

advertise special introductory offers, like

ì5 Books for $1.î By law, a

company must ship the merchandise within 30 days of

receiving your order. If the

merchandise canít be shipped

within that time, the company

may offer you an equivalent

alternative. If you donít want

the alternative, you can cancel

your membership. The company

must honor your cancellation

request, as long as you return

the introductory merchandise.

Another Type of Clubs or

Plans

Some book, CD or video clubs may involve

membership in another type of plan called a

ìcontinuity plan.î ìContinuity plansî automatically send merchandise or provide services until

you tell them to stop, without sending an

announcement or a rejection form before each

shipment. While these plans are not covered

under the FTCís Prenotification Negative

Option Rule, basic consumer protection principles apply: Sellers must give consumers

information about the planís terms and conditions, clearly and conspicuously, in their promotional materials.

Some continuity plans provide an ìapprovalî

period so you can check out the merchandise

and decide whether to keep it and pay for it.

Many programs selling collectibles, like stamps

or coins, work this way. Other continuity plans

require you to pay for merchandise when you

receive it.

Protect Yourself

Before you agree to any prenotification plan:

✔ Read the terms and conditions of the plan

carefully so you understand the obligations

of membership before you join.

✔ Compare costs. The introductory merchandise may be substantially discounted but

you may be required to buy additional

merchandise at the clubís regular prices and

to pay shipping and handling on those

purchases. Do the math to compare the

clubís prices and the shipping charges

against those of other sellers.

✔ Keep copies of plan documentation that

explain the terms and conditions of the plan

and the rejection forms you return to the

seller. Itís also a good idea to keep docu-
Federal Trade Commission

Bureau of Consumer Protection

Office of Consumer and Business Education

May 2001

F C EDERAL RADE OMMISSION T FTC OR HE ONSUMER

1-877-FTC-HELP www.ftc.gov

Facts for Consumers

mentation of the date you mailed the rejection forms.

✔ Check out the seller. Contact your local

consumer protection agency or the Better

Business Bureau to find out if they have any

complaints on file. A record of complaints

may indicate questionable practices, but a

lack of complaints doesnít necessarily mean

that the seller is without problems. Unscrupulous businesses or business people often

change names and locations to hide complaint histories.

Where to Complain

If you have a problem with your plan, try to

resolve it with the seller first. If youíre dissatisfied with the response, contact your local Better

Business Bureau or local consumer protection

agency.

The FTC works for the consumer to prevent

fraudulent, deceptive and unfair business

practices in the marketplace and to provide

information to help consumers spot, stop and

avoid them. To file a complaint or to get free

information on consumer issues, visit

www.ftc.gov or call toll-free, 1-877-FTCHELP (1-877-382-4357); TTY: 1-866-653-

4261. The FTC enters Internet, telemarketing,

identity theft and other fraud-related complaints

into Consumer Sentinel, a secure, online

database available to hundreds of civil and

criminal law enforcement agencies in the U.S.

and abroad.