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These rules impact other businesses like direct mail and telephone merchants!

It’s important you fully understand the impact of this on your business. Visa, Mastercard & the FTC are all making some big changes and these new rules have the possibility to hurt your business if you don’t understand them.

In another post I’ll get into why this all happened and who’s responsible, but for now I wanted to share an email I just got from one of my processors. It sheds some light on what the upcoming changes will be. Keep in mind that the official rules have not been adopted and released yet… so it could change. That being said, here’s some light reading for you:

IMPORTANT ANNOUNCEMENT REGARDING DIRECT MARKETING BEST PRACTICES

As we shared with you previously, our merchant processing company has made changes in light of Visa and MasterCard’s desire to eliminate practices considered damaging to the brands (“brand damaging activity”), particularly in the Direct Response industry. As continued support for merchants conducting business in a manner that protects both businesses and consumers from fraud, our merchant processing company is providing additional criteria and Best Practice Guidelines.

Direct Response merchants are defined as those marketing directly to consumers. Historical marketing channels include radio, television, mail, and print, along with demonstration booths and door-to-door salespeople. Internet websites and marketing capabilities have presented new opportunities for this industry, along with new challenges.

“Prenotification Negative Option” or simply “Negative Option” practices in particular, have fallen under intense scrutiny. The advertising rules are defined and enforced by the Federal Trade Commission “The Prenotification Negative Option Rule”, for all avenues of marketing. Negative Option has been defined as a “category of commercial transactions in which sellers interpret a customer’s failure to take an affirmative action, either to reject an offer or cancel an agreement, as assent to be charged for goods or services.”

our merchant processing company will consider approval of merchant accounts for products and/or services employing “Negative Option”
enrollment under our defined “Direct Response Best Practice Guidelines”.

While practices defined in this document are geared toward internet websites, the FTC Rules apply to all marketing channels, including mail or telephone orders (MOTO). our merchant processing company will review MOTO accounts for compliance with guidelines as applies to that channel, paying particular attention to described ‘prohibited’ practices.

DIRECT RESPONSE BEST PRACTICE GUIDELINES FOR MERCHANTS

TRIAL OFFERS

Marketing models that employ “Free-Trial”, “Deferred Billing” and/or “Shipping Only” are considered trial offers for purposes of this communication. Consumers must be receiving a tangible good or contracted service in exchange for charging of payment cards. Incentivized discount offers are acceptable when the cardholder is receiving goods or services in exchange for payment; however we will be unable to support accounts engaging in hidden or delayed charges and ‘free’ offers that are not truly free.

1. Avoid using terms in your marketing and offer presentation such as “Free”, “Risk Free” or any similar and potentially misleading phrases when consumers will be enrolled in a monthly continuity program at the end of a trial period, or will be paying a deferred charge for the trial period. The phrase “Free Trial” is prohibited unless there is truly no cost or obligation incurred by the consumer.

2. “Shipping & Handling Only” offers must be a fair and accurate shipping charge reasonable to be accrued by the merchant for providing the product.

3. Trial offers must be extended for a minimum of 10 days.

4. Trial periods should not begin until the product is shipped to the consumer.

MARKETING

1. Avoid creating a ‘false sense of urgency’ for the consumer. Unless the consumer’s ability to order is genuinely taken away after a specified timeframe or order count is reached, this practice is prohibited. Use of applications such as countdown clocks, tickers, or language such as “Offer Expires Today!” is also prohibited.

2. Product claims, by law, must be truthful. Claims regarding effectiveness must be substantiated by clinical research conducted to support the claims, and consistent with the formulas and ingredients in your product

3. Qualifications for trial periods of a product should follow pre-determined rules disqualifying consumers who do not meet parameters, including but not limited to: Age, Weight, Height, and Location.

4. Unreasonable claims or guarantees are prohibited. Examples of claims considered unreasonable are: “Flushes Pounds”, “Flushes Toxins”, “Builds Muscles”
- Stating that use of a product will result in permanent weight loss
- Stating that a product will cause the consumer to lose a specified amount of weight in a specified timeframe
- Stating that a product will cause substantial weight loss no matter what or how much the consumer eats.
- Stating that use of a product can cause weight loss (or muscle growth) in specific body parts

“Free Money”, “Instant Money”

- Stating that the product can substitute the income of a full time job
- Stating that money can be earned with little to no effort or investment
- Stating that use of a product will earn you hundreds of thousands or millions of dollars

Additional examples include:

- Stating that the product has been successfully used by an unrealistic or unsubstantiated number of people
- Stating that a product will secure the consumer a job, either at the product’s company or another company
- Stating or implying that a product is endorsed or in any way associated with President Obama or a government entity.

ENDORSEMENTS/TESTIMONIALS:

1. Endorsements and testimonials of user experiences must reflect the true and honest opinions of the endorsee(s).

2. Endorsements and testimonials provided must present a clear picture to consumers of realistic results of using the product. If advertisers do not have substantiation of a specific claim or endorsement, then generally expected results must be clearly disclosed and backed by substantiation of any claims.

3. Blogs used for promotional purposes must be in compliance with published FTC guidelines, representing an accurate and full representation of the endorsee, or clearly designated as a fictional story if developed internally for marketing purposes.

4. News Sites published in marketing materials must be in compliance with published FTC guidelines, and must be clearly presented to the consumer as an advertorial. Written consent should be obtained from a media outlet prior to using the logo.

5. Implied celebrity endorsement by use of an image in your marketing is prohibited without express legal written consent.

AFFILIATE MARKETING (CPA) NETWORKS

A significant contributing factor to Historical Excessive chargeback violations has been the utilization of CPA Networks. Transactions generated from internet traffic and all other lead sources must be managed and monitored for potential fraud using an approved system. Third Party service engagement may be a requirement for account approval.

1. CPA Networks should contractually be held accountable for monitoring traffic generated from participating marketers.

2. Merchants must have monitoring plans in place to detect suspect traffic and monitor Affiliate and Sub-Affiliate performance.

BILLING TERMS DISCLOSURE

The FTC has recently published guidelines regarding “Negative Option” enrollment programs and is taking a very aggressive position against merchants utilizing/employing this business practice. Recommendations taken in part from the FTC’s website may include but are not limited to the following:

1. Negative Option disclosures must be clear and conspicuous to the consumer and comply with published FTC
principals.

2. The full price of products sold must be within reasonable “fair market value”
3. Under no circumstances should consumers be billed for a product or service not disclosed.

4. Consumers must be required to validate understanding of the terms of the offer twice during order submission.
The first validation can take place with the initial offer presentation prior to submission of credit card information, and the second during the checkout process. The confirmation order page must also require consumers to acknowledge that they agree to the Terms & Conditions and authorize the merchant to charge the credit card for the disclosed dollar amount. Terms must be displayed adjacent to the “submit”,”confirm” or any other “call to action” button confirming the order. The price must be within 100 pixels of the “submit”,”confirm” or any other “call to action” button.

- Terms must be in a minimum 12-point “easy to read” font.
- Avoid visually distracting graphics from the display of terms.
- Pre-checked boxes must never be used.
- Consumers should be required to actively and individually select each offer or bonus during the checkout process when there are multiple offers or up sells presented. No offers or up sells should be pre-selected or pre-checked.

- Consumers should not be able to move forward in the offer or checkout until the box acknowledging the terms is checked.
- Verbiage must clearly disclose the enrollment into an ongoing membership with no distraction. An example of an acceptable disclosure is: “By clicking “Submit” you acknowledge that you understand you are being enrolled in a 10 day trial for $4.95, and after expiration of the 10 day trial period you will be charged $59 per month until you cancel your service”
- All products or services purchased when the call-to-action button is clicked should be billed as a single charge unless the order is fulfilled at different times requiring multiple charges.
- Shipping and Handling should not be billed separate from charges for the product or service.

BILLING TIMEFRAMES

1. A merchant may not bill a consumer the full price twice in a 30-day span. An acceptable billing cycle example would be:

- Day 1 – Consumer signs up for a 10 day trial offer with paid shipping of $4.95 charged at the time of order.
- Day 11 – The first monthly order is shipped and the consumer is billed the full price of $59.
- Day 41 – The second monthly order is shipped and the consumer is billed the full price of $59.

2. Consumers should not be billed prior to shipment of products.

REFUND POLICIES

Merchants must not make it difficult for consumers to exercise the disclosed cancellation procedures and all cancellation requests must be honored in accordance with the stated terms of the transaction.

1. Refund policies must be disclosed prior to the sale completion. Establish a clear, concise statement of your refund and credit policy. Your policy should be consistent with the objectives of your business and the products or services sold.

2. Merchants must not require return of any trial offer product samples in order for the consumer to receive a refund, or cancel their ongoing subscription.
3. “Full Money Back” or “Full Satisfaction” guarantees are considered false and prohibited unless the offer provides a full refund on all products, including but not limited to Shipping & Handling charges.

4. Refunds should be for the full amount charged including shipping and handling

5. All future billing to a customer should be canceled when a refund is issued.

6. All future billing to a customer should be canceled when a chargeback is received.

BACK END OFFERS, AKA UP SELLS OR CROSS SELLS:

All sales should be directly between the business entities (merchants) processing the transactions and the consumer, with consumer authorization for all purchases.

1. Under no circumstances can consumer data be shared with another company as this is a violation of Brand
Regulations, including but not limited to the Payment Card Industry Data Security Standard.

2. Forced and hidden up sells are strictly prohibited

3. Up Sells with recurring charges are prohibited, regardless of consumer opt-in or acknowledgement of the offer.

4. A one-time bonus offer may be extended to the consumer for an additional product offered by the same company as the initial transaction. The price of the bonus offer must be clearly disclosed and the consumer must acknowledge the terms of the sale prior to providing credit card information for completion of the sale, and again at order confirmation/ submission.

DESCRIPTORS

1. ALL MERCHANTS DEFINED AS OFFERING A DIRECT MARKETING PRODUCT WILL BE ASSIGNED A DESCRIPTOR FORMATTED TO COMPLY WITH VISA REQUIREMENTS, TO INCLUDE AN *.

2. Billing descriptor should be consistent with the website name, marketing materials, purchase confirmation, and shipping notification (if any) sent to the consumer.

FULFILLMENT

1. Orders must be fulfilled in a timely manner. It is recommended that all products be shipped within 48 hours (2 business days) from the date of order.

2. A confirmation email should be provided for all online orders with physical shipment, within the prior 5 days to shipment or 2 days following shipment, including the following information:

- Merchant contact information (at minimum a consumer service phone number)
- Order information including purchaser’s name, unique order or customer ID, summary of item(s) purchased
- Terms of the order, including initial amount billed and future billing schedule (this should be stressed)
- Cancellation and refund policy
- Delivery confirmation / tracking information
3. An invoice should be included with the product including the following information:

- Merchant contact information (at minimum a consumer service phone number)
- Terms of the order, including initial amount billed and future billing schedule
- Cancellation and refund policy

CUSTOMER SERVICE:

1. Multiple methods of cancellation must be provided for consumers to cancel or request refunds, including at least two options of contact. Example of acceptable service channels include: phone, email, mail, and online chat. Phone support is strongly recommended as one of the options.

2. “Contact Us” information including contact methods and hours of availability should be prominently displayed in all marketing, offer and payment pages, as well as included in purchase confirmations, invoices and any other communication with consumers.

3. Customer Service must be easily accessible and available during reasonable business hours

4. Refund and Cancellation Policies must be followed as disclosed to the consumer at the time of order

5. Hold times to reach Customer Service must be less than 2 minutes.

6. After hours voice mail should include a greeting that properly identifies the merchant to the consumer, provides hours of Customer Service availability and an expectation for call back.

RESOURCES:

The FTC has published the regulations along with many resources online for businesses and consumers. A few helpful links are included below:

Commercial Practices Part 425, Use of Prenotification Negative Option Plans:
http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=16&PART=425&SECTION=1&TYPE=TEXT

Prenotification Negative Option Plans:
http://www.ftc.gov/bcp/edu/pubs/consumer/products/pro09.pdf

Advertising and Marketing on the Internet:
http://www.ftc.gov/bcp/edu/pubs/business/ecommerce/bus28.pdf

Dot Com Disclosures:
http://www.ftc.gov/bcp/edu/pubs/business/ecommerce/bus41.pdf

Direct Response industry publications have provided articles with some clarification regarding these guidelines:

http://www.responsemagazine.com/resources/legal-resources/legal-review-getting-strict-with-negative-option- marketing-1351

http://www.dmnews.com/get-comfortable-with-new-ftc-regs/article/136023/

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Sign up to my mailing list by filling out the form on the top right of my site and I’ll email you every time we go live.  You can also follow me on Twitter to get notifications when the show goes live.  You can catch the show over at http://www.billmcintosh.tv/live every Tuesday night at 6:30 PM Pacific Standard Time.

The first half of the show covered social marketing and what tools I use to effectively do marketing with social media.  I’ll list all the links I talk about in the video below. I covered how to use sites like Twitter to do social marketing.  Twitter is currently my favorite social media site and I recommend anyone who needs traffic, leads and sales to start using it now. So if you aren’t using Twitter: Shame on you!   Start now by clicking this link to follow me on Twitter .

So without Further delay, here’s the video:

Here is the links of resources I mentioned in the video:

Tweet Pro:
A very valuable paid tool to help you find and follow targeted Twitter users.  It saves a lot of time and ads a little automation to the process.

Tweet Grid:
Track Twitter conversations in your browser.

Automatic Twitter Unfollowing and Follower Management:

Tweet Later:
Will automatically follow people who follow you and direct message them plus many other useful features.

Social Too:
Similar to Tweet Later, but will automatically unfollow people who stop following you.

Twitter Karma:
A good tool to manage your followers and identify people to unfollow.

Pinging All Your Social Profiles:

Ping.fm:
A good tool to automatically update many of your social networking and social media profiles.

My Favorite Social Media Site:

Utterli:
My new favorite social media site.  It’s like a multimedia Twitter tied to your phone.  You can record video, audio and photos right from your phone and update your timeline.  It also cross-posts these to your other social networking profiles.

More Social Sites, Follow Me:

FaceBook:
Friend me up on Facebook

Zannel:
Like Utterli, but not quite as powerful (at least as far as I can tell right now).

Firefox Social Media Toolbar:

Yoono Firefox plugin:
Keep track of all your social networks right in Firefox.

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YouTube Sponsored PPC Search: The New Google Adwords

It should show you everything you need to know in order to get started.  It basically works like any other PPC (pay per click) search advertising.  You put in the keyword you want to target and the highest price you’re willing to pay for clicks.

If Google handles this right, it could become the next Google AdWords. I’ve been doing a lot of testing the past few days and will be sharing all the tips and tricks I figure out to my subscribers.  So if you aren’t already subscribed, enter your name and email address into the top right of any page on my site http://www.billmcintosh.com and sign up.

I’ll also be covering everything I’ve learned in my upcoming live broadcast of my Internet marketing show that happens every Tuesday at 6:30 PM Pacific Standard time.  To tune in, just go to: http://www.billmcintosh.tv/live when it’s show time.  There will be a live chat room and I’ll be answering your online marketing questions.

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For example, this story is the first that I’m submitting.  You can see my Buzz button in the upper left.  In fact, I think I hear it calling, “Click me…click me”.

For those of you who don’t know about Yahoo Buzz: It’s a special section of Yahoo! that allows users to vote on news topics.  It’s very similar to other social news sites like Digg and Reddit in that the users have the control on what appears on the main pages.  In Yahoo’s own words, Buzz is: “The Web’s most remarkable stories, determined by people like you. Stories are ranked based on your votes, emails, and searches.”

The “Buzz Effect”

What is also similar to Digg is the possibility of enormous increases in website traffic over a very short time. Digg is famous for the “Digg Effect” where small website owners get their servers overloaded and have their sites go offline from the sudden surge in website traffic.

So the question is: Can you handle getting “buzzed”?  I for one would like to find out.  Would you like to help? I certainly would not mind if you clicked the Buzz button above and “Buzzed me up!”.

Yahoo Is A Traffic Powerhouse

Yahoo Buzz will be a way for webmasters to tap into Yahoo’s millions of users for free.  In fact, Yahoo has this to say: “The best content may be featured on the Yahoo! homepage, potentially driving millions of clicks to your site.” I’m sure you like the sound of that!  How would you like to have your website featured on Yahoo’s home page?  Could you imagine how much traffic that would bring? The best part is that right now there is very little competition for your stories.  As webmasters find out how powerful this tactic is for getting traffic I’m sure that will change.

Submitting A Story Is Easy

Submitting a story to buzz is very simple.  One way is to just put a Yahoo Buzz button on your site.  It will look like the button you see above on this story.  I suggest using the advanced features that they explain further down the page at: http://buzz.yahoo.com/buttons  You can also directly submit your stories here: http://buzz.yahoo.com/submit/

If my readers would like, I might get one of my developers to build a WordPress plugin that can automate putting Yahoo Buzz buttons on your blog.  Just sign up at http://www.BillMcIntosh.com using the sign up box on the top right and then comment on this story to let me know if you’re interested.  If I get enough response I’ll build the plugin and give it to you free.

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