Many businesses employ the negative option technique of generating business. The negative option involves offering either a free trial or a hugely discounted introductory offer in the hope of achieving further business. The negative option is so called as it requires the consumer to opt out of the contract after a certain timeframe, or the contract recurs. Businesses that have employed this technique successfully in recent years include online DVD rental companies and Amazon with its Amazon Prime service. There has been some stiff opposition to negative option policies that are believed by some to harm businesses. It is vital that if you are considering a negative option policy for your business that the strategy is thought out carefully and in detail to ensure that the only effect on the business is a positive one.
In order to limit the number of chargebacks to your merchant account there are a number of strategies that your business could employ. For example, keeping customers informed exactly of what is happening throughout the trial period, including sending e-mails out five days before the end of the trial period which will give the customer ample time to opt out of the contract. If it can be proved that the customer received your communication, it can be assumed that if they have not cancelled the contract then they wished to continue. Conversely, as the initial free trial was marketed as a trial, it must follow that a customer has the option to cancel without any fuss at the end of the trial. Making customers jump through hoops and follow convoluted conditions in order to cancel will leave you liable to chargebacks.
Another strategy endorsed by some merchant account providers is to take the credit card details at the end of the trial. This would then become almost a positive option as you have given a free trial that is truly free and then asked the customer for their business. In this case the risk of chargebacks would be minimal as your customers would have made an informed decision based on the trial of your services.
When dealing with the small print in the terms and conditions, the Federal Trade Commission has published a set of guidelines regarding the use of the negative option technique. Terms and conditions must be clear and concise; unnecessarily long and complicated terms and conditions are construed as an attempt to mislead in the eyes of the FTC. Terms and conditions must be conspicuous and displayed in a font and color that is easy to read. Any terms and conditions must be displayed and agreed to before any transaction takes place, and certainly before the consumer incurs any financial obligation. As mentioned above, it must be made simple and straightforward to cancel the trial at any moment. Finally, affirmative consent must be given by the consumer. This could be by checking an agreed checkbox. Pre-checked boxes will not count; the box must be checked by the consumer.