Beware of unexpected buyers' clubs charges

National Fraud Information Center

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Consumers are finding charges on their credit card bills and debits from their bank accounts for memberships in buyers' clubs that they never agreed to join, according to the National Consumers League, a nonprofit advocacy organization.

Complaints about buyers' clubs to NCL's National Fraud Information Center, a hotline for consumers to report telemarketing fraud, are on the rise. They've climbed from an average of four per month in 1999 to 12 per month in the first six months of this year. Buyers' club complaints rank as the ninth most common telemarketing complaint.

In some cases the charges or debits have appeared after consumers called to buy merchandise such as beauty products and lighting fixtures that were advertised on television.

"Typically the products are offered for very low prices, or they may be free but the consumer pays for shipping," NFIC director Susan Grant said. "What consumers may not notice is a disclosure in fine print on the TV screen that purchasers will be enrolled in a club that offers discounts on other products."

In other cases, consumers have received calls from telemarketers selling products and offering, in addition, buyers' club memberships. Sometimes they are described as "free trial offers" but the charges are made immediately. Other consumers report being charged for memberships despite the fact that they said they only wanted the merchandise and didn't want to join the club.

And some consumers say they have received "welcome packets" for club memberships even though they did not recall having any contact with the company. These included notices that the consumers would be charged unless they contacted the company to cancel. But when they called, the consumers couldn't get through or were told the charges would not be removed.

NCL plans to urge the Federal Trade Commission to look closely at these buyers' club problems. NCL also suggests that the FTC plug some loopholes in the existing rule and strengthen it by:

  • Including under the rule calls that consumers make to marketers in response to advertisements in the newspaper, on television and in other general media.
  • Requiring that telemarketers who make "trial offers" must notify consumers when the free period is up and get their consent to be charged for continued services.
  • Requiring telemarketers to tell consumers that they have the right under federal law to be put on a "do not call" list if they do not wish to hear from the company again.

Be wary of offers that involve very low prices or free products. "These offers may only be the lure to get your credit card or bank account information," Grant said. She also cautioned consumers to look at their credit card and debit card statements carefully. "Once someone has your account number, it's possible to charge you or debit your account even if you never agreed to purchase the services," she said. Consumers who find unauthorized credit card charges or debits should dispute them immediately with their credit card issuer or bank.

The top 10 telemarketing frauds reported to NCL's National Fraud Information Center in the first six months of 2000 were as follows:

    1. Prizes and Sweepstakes: phony prize awards requiring payment of fees first.

    2. Magazines: fake sales or renewals for magazine subscriptions that are never received.

    3. Credit card issuing: phony promises of credit cards requiring advance payment of fees.

    4. Work-at-home: kits sold with false promises of profits.

    5. Advance fee loans: empty promises of loans requiring advance payment of fees.

    6. Telephone slamming: phone service is switched without the consumer's knowledge or consent.

    7. Credit card loss protection: unnecessary insurance sold using scare tactics or misrepresentations.

    8. Telephone cramming: billing consumers for optional services they never ordered.

    9. Buyers' clubs: unauthorized charges for memberships in buyers' clubs consumers never agreed to join or didn't agree to renew after initial trial offer.

    10. Travel/Vacation: offers of free trips or discount travel that never materialize.

Zall, Bureaucratus columnist and a retired federal employee, is a freelance writer based in Silver Spring, Md. He specializes in taxes, investing, business and government workplace issues. He is a certified internal auditor and a registered investment adviser. He can be reached at [email protected].


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