Some free trial offers cost big bucks

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business-opportunities.biz

via Some free trial offers cost big bucks, clarionledger.com

PDF: trial-offers

The “trial” membership is a tried-and-true strategy for companies and has worked for decades to lure consumers.

It works like this: The customer is not really interested in paying a lot of money for a subscription or product but might be interested if they got free use for a set period (usually 30 days). These offers seem “risk-free.” After all, you don’t have to pay anything and can just send the product back if you don’t like it or aren’t satisfied. This strategy is used to overcome initial objections and is used to sell everything from online subscriptions to mattresses.

But the “free trial” only works if the company abides by its promise to not charge anything for the specified time, and the customer carries out his or her obligations. If, at the end of the deal, an unscrupulous company charges you anyway (regardless of your intentions), everyone’s confidence in the system is reduced.

Last week, the Federal Trade Commission announced the final settlement of a 2010 case in which a company called iWorks and its owner, Jeremy Johnson, were accused of operating a huge scheme in which consumers signed up for “trial” access to a variety of online services, grant programs and money-making schemes, only to have their accounts charged anyway. The alleged haul: more than $280 million.

According to the FTC, consumers who bought iWorks’ sophisticated pitch were asked to provide their credit card or bank account numbers to cover “shipping and handling” fees of $1.99. But iWorks then turned around and charged them one-time fees of $129.95, plus recurring monthly fees of $59.95. “To keep the scam going,” the FTCalleged in its 2010 news release, “the defendants tricked banks into giving them continued access to these billing systems by creating 51 shell companies with figurehead officers, and by providing the banks with phony ‘clean’ versions of their websites.”

What’s more, the FTC alleged the scheme used fake positive online reviews, used deceptive testimonials and violated federal law by debiting customers’ checking accounts without their authorization.

With last week’s announcement, the FTC noted that the $280 million judgment is being suspended until iWorks’ assets — frozen by the court — are turned over to the FTC for evaluation. Two defendants had their own judgments suspended because they told the court they were broke.

But Johnson’s troubles are far from over, as he will have to spend some prison time. Johnson and a colleague, Ryan Riddle, have been convicted in a Utah court of making false statements to a bank on multiple IWorks merchant account applications. Johnson was sentenced to 11 years and three months in prison, and Riddle to five years and three months. Both men will be subject to three years of supervised probation upon release.

What, if any, restitution will be made to the victims of the scheme hasn’t been announced.

If you’re considering a “free trial” arrangement for a product or service, the FTC has this advice:

Research the company online. See what other people are saying about the company’s free trials — and its service. Complaints from other customers can tip you off to “catches” that might come with the trial.

Find the terms and conditions for the offer. If you can’t find them or can’t understand exactly what you’re agreeing to, don’t sign up.

Look for who’s behind the offer. Just because you’re buying something online from one company doesn’t mean the offer or pop-up isn’t from someone else.

Watch out for pre-checked boxes. If you sign up for a free trial online, look for already-checked boxes. That checkmark may give the company the green light to continue the offer past the free trial or sign you up for more products — only this time you have to pay.

Mark your calendar. Your free trial probably has a time limit. Once it passes without you telling the company to cancel your “order,” you may be on the hook for more products.

Look for info on how you can cancel future shipments or services. If you don’t want them, do you have to pay? Do you have a limited time to respond?

Read your credit and debit card statements. That way you’ll know right away if you’re being charged for something you didn’t order.

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