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Federal Trade Commission and Predatory Payment Practices

By January 13, 2007June 19th, 2010Internet Lawyer

Like other businesses, Internet marketers get into Federal Trade Commission (FTC) trouble when their payment terms aren’t idiot-proof. When in doubt, assume your consumer has a fourth grade education and barely understands how to order and pay for a meal at a fast food restaurant.

If your buyer thinks, mistakenly or not, that he paid too much for your value combo, he suddenly becomes smart enough to file a complaint with the FTC.

To be sure, there are unfair, deceptive, and fraudulent online payment practices, but commonly complaints arise because of buyer’s remorse (second thoughts about what was just purchased) or because the buyer didn’t fully understand the transaction.

Here are some typical payment complaints to the Federal Trade Commission.

* Goods or services were purchased via the Internet but were not delivered as promised.

* Vendor refused to honor a money-back guarantee.

* Multiple credit card billings were made for a single item.

* Hidden fees were built into the sale.

* Subscription services couldn’t be canceled and the automated billing continued. FTC inquiries into your financial dealings can include issuing a CID for your bank records. For example, BlueHippo Funding, LLC provides credit for purchases of computers and other equipment. On December 13, 2005, the FTC denied BlueHippo’s request to exclude its bank records from examination in an investigation.

In another case, on November 21, 2006, the FTC obtained a court order against a group selling Internet Service Provider (ISP) and web design services. The order permanently barred the defendants from making misrepresentations when selling, prohibited the defendants from billing consumers without first obtaining their consent – which they must record – and provided strict rules they must follow to ensure that consumers the defendants call were protected from fraud and deception. Finally, the order established a program through which defrauded consumers could obtain refunds.

Don’t let your business be subjected to a Federal Trade Commission investigation or lawsuit because of alleged financial misconduct.

Communicate. Communicate. Communicate. Excellent client service should resolve most buyer’s remorse issues and full disclosure of payment terms and conditions, including any limitations on money-back guarantees, will go a long way to taking care of other dissatisfied clients.

Mike Young, Esq.

Author Mike Young, Esq.

Mike Young has been practicing business and technology law since 1994 and is an angel investor in startups. He's been an entrepreneur since 1988. To get legal help from Attorney Young, click here now or call 214-546-4247 to schedule a phone consultation.

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