Increased consumer protection with respect to negative options

(a) Disclosure of negative options It shall be unlawful for any merchant of record to charge or attempt to charge a credit card, debit card, bank account, or other financial account of any consumer, or otherwise receive payment from any consumer, through a negative option, unless the merchant of record clearly and conspicuously discloses all material terms of the contract involved before receiving payment or charging the consumer, or otherwise receiving payment, through such negative option. (b) Express informed consent for negative options (1) Requirement It shall be unlawful for any merchant of record to charge or attempt to charge a credit card, debit card, bank account, or other financial account of any consumer, or otherwise receive payment from any consumer, through a negative option, unless the merchant of record obtains the express informed consent of the consumer before receiving payment or charging the consumer, or otherwise receiving payment, through such negative option. (2) Duration A merchant of record shall keep or maintain verification of the express informed consent obtained pursuant to paragraph (1) for not fewer than 3 years, unless such merchant of record demonstrates by a preponderance of the evidence that the merchant of record uses processes that ensure a consumer may not technologically complete a transaction without such express informed consent. (c) Term limitation for negative option contracts After the expiration of a preliminary period, it shall be unlawful for any merchant of record to automatically renew or otherwise continue a negative option contract with any consumer for a period that is greater than the length of the preliminary period, unless such merchant of record, at the time of such expiration, obtains the express informed consent of the consumer to renew or otherwise continue such negative option contract. (d) Cancellation of negative option contracts (1) Online merchants In the case of a negative option contract that is entered into electronically, it shall be unlawful for any merchant of record to enter into such negative option contract with any consumer unless such merchant of record provides to the consumer a simple mechanism, including a direct link to an electronic form, that enables the consumer to submit a request to cancel such negative option contract without requiring the consumer to take additional steps by any means other than electronically. (2) Other merchants In the case of a negative option contract that is entered into through means other than electronically, it shall be unlawful for any merchant of record to enter into such negative option contract with any consumer unless such negative option contract provides the consumer with a simple mechanism for cancellation, in the same manner, and by the same means, as such negative option contract was entered into, or, if not practicable, through some other simple mechanism for cancellation. (e) Requirements for free-To-Pay conversion contracts It shall be unlawful for any merchant of record to charge or attempt to charge a credit card, debit card, bank account, or other financial account of any consumer for any good or service sold under a free-to-pay conversion contract, unless each of the following is met: (1) Before completing the financial transaction, or otherwise receiving payment, the merchant of record provides the consumer with a notification of the terms of the negative option contract and obtains the express informed consent of the consumer to such terms, including the following terms: (A) For an introductory period, the consumer will receive the good or service at no cost or for a discounted cost. (B) The amount the consumer will be charged or otherwise required to pay for the introductory period. (C) The amount the consumer will be charged or otherwise required to pay, on a recurring basis, starting with the first financial transaction after the introductory period. (D) The total cost (or range of costs) the consumer will be charged or otherwise required to pay through the entire term of such contract (if such term is less than 12 months) or cost information that enables the consumer to determine the total cost for the subsequent 12-month period, to the extent known. (2) Before the first charge, payment, or price increase after the introductory period, the merchant of record provides notification to the consumer about the upcoming charge, payment, or increase and provides the consumer with— (A) the terms of the negative option contract, including the length of time required for the merchant of record to complete any cancellation request; and (B) direct access to information about the simple mechanism for cancellation. (f) Other notification requirements for negative option contracts (1) General notification and access With respect to any negative option contract entered into by a merchant of record and a consumer, the merchant of record, at regular intervals as determined by the Commission (but not less frequently than annually) while such negative option contract remains in effect, shall provide the consumer with— (A) a notification of the terms of such negative option contract; and (B) direct access to information about the simple mechanism for cancellation. (2) Additional notification and access If a negative option contract specifies a period of time during which the merchant of record shall complete a cancellation request, not fewer than 2 but not more than 7 days before the last day on which the consumer may cancel such negative option contract without incurring additional charges, the merchant of record shall provide the consumer with the notification and access required by paragraph (1).