Signature January/February 2015 - 41
dues and other association products and
services online.
While recurring payments have clear
benefits for both an association and its
members, they should be structured
to comply with applicable federal and
state consumer protection laws. The
Restore Online Shoppers' Confidence
Act (ROSCA) and various federal and
state payment-specific laws and regulations govern setting up recurring payment
plans for online sales. Although these laws
and regulations are generally focused on
transactions with consumers (not business-to-business transactions), regulators often treat small businesses and sole
proprietors like consumers.
Moreover, trade and professional associations should consider setting up
compliant payment systems, given the
difficulty in determining when a transaction involves a business versus a consumer, especially where an association's
membership includes individual members
(as in a professional association) or the
association regularly sells subscriptions
to the public.
ROSCA - NEGATIVE OPTION,
AUTOMATIC RENEWAL, AND
CONTINUITY PLANS
Trade and professional associations that
allow members or the public to purchase
memberships, subscriptions, or other
products or services on a recurring basis
should review their websites and other
online payment portals for compliance
with ROSCA. For online transactions
with a negative option feature - whether
in the form of trial offers, automatic subscription renewals, or continuity plans -
ROSCA requires the seller to disclose to
the consumer the material terms of the
offer before the consumer enters payment
information or completes the order.
To comply with ROSCA, a website
must:
n■ Clearly and conspicuously disclose
the material terms of the transaction
before obtaining billing information.
Each of these payment
mechanisms is subject
to specific requirements
that govern preauthorized,
recurring payments.
Obtain the consumer's express informed consent before charging the
consumer.
n■ Provide a simple mechanism for the
consumer to stop recurring charges.
In addition to ROSCA, a number of
states have laws that govern online sales
with recurring payments. California's
continuity law, for example, is similar to
ROSCA but includes the additional requirement that a website must send the
purchaser an acknowledgment - "in a
manner that is capable of being retained
by the consumer"- that includes the sale
terms, the cancellation policy, and how
to cancel. A standard email confirmation
and/or physical welcome letter with the
required information should suffice, as
both of these items can be retained by the
consumer. Not surprisingly, given the size
of the California market, California law
often becomes a de facto national standard.
n■
PAYMENT-SPECIFIC LAWS
AND REGULATIONS
To the extent that members (or the public)
can submit payment by credit card, debit
card, or an electronic fund transfer from a
checking account, each of these payment
mechanisms is subject to specific requirements that govern preauthorized, recurring payments.
The Electronic Fund Transfer Act and
the Consumer Financial Protection Bureau's implementation of Regulation E
are the primary legal authorities governing electronic fund transfers (EFTs).
In addition, NACHA (a not-for-profit
association, previously known as the National Automated Clearing House Association) manages the ACH Network,
a system for the electronic movement of
money and data. Together, Regulation
E and NACHA set forth the steps that
a website must take to obtain authorization from a consumer to initiate recurring debits from the consumer's debit
card (Regulation E) or checking account
(NACHA and Regulation E). Regulation
E also applies to telephone sales, with a
few unique challenges when it comes to
obtaining consumer authorization.
Under Regulation E, an EFT authorized in advance to recur at substantially
regular intervals (e.g., every 30 or 45 days)
can be authorized only by a "writing,
signed or similarly authenticated by the
consumer." A copy of the signed authorization must be provided to the consumer.
If the amount of a preauthorized debit or
check card payment will vary, the merchant must notify the consumer at least
10 days before the scheduled transfer that
the amount of the preauthorized debit
will vary from the amount of the previous
debit or will vary from a preauthorized
range of amounts.
An electronic signature or a recording will satisfy the "similarly authenticated" requirement if the authorization
would constitute a written and "signed"
authorization under Electronic Signatures in Global National Commerce Act
(E-SIGN). Electronic signatures include,
but are not limited to, digital signatures
(e.g., retyping the email address) and security codes.
Ideally, associations should require consumers to check or re-type their name
or email address into a specific box to
complete the transaction, and include
language informing the consumer that by
JANUARY/FEBRUARY 16
signature
41
Table of Contents for the Digital Edition of Signature January/February 2015
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