Free trial offer no longer free

December 2, 2010 00:20 by Consumer Ed

Dear Consumer Ed:

Last month I signed up for a 30-day free trial for a credit monitoring system. I just got my latest credit card statement and see that the company just charged me a $29.99 fee. When I spoke to them they told me that since I never called to cancel after the free trial, they had automatically renewed my service. I don’t think I should have to pay this bill. What can I do?

Consumer Ed says:

This practice – automatically renewing an agreement unless the customer specifically notifies the company in advance not to renew – is called “negative option billing.” It is a tactic that is being used by more and more businesses, often to the detriment of consumers. Although it is a “legal” practice, there are rules that businesses that engage in this type of billing are required to follow:

  1. Any promotional materials, such as advertisements, sent to you before you contracted with the business must clearly describe billing details, and whether you are automatically re-enrolled after the initial trial period. These materials must also describe how you are to contact the business to cancel your account before the next billing cycle.
  2. After your agreement is in effect, the business must mail you, before any automatic billing, a form notifying you that the agreement will be renewed unless you specifically cancel. The business must also tell you what method you need to use to cancel – i.e. by email, in writing, etc.

You are not bound by the automatic renewal if the business has not complied with these requirements. Therefore, you should go back and read your agreement closely, as well as any promotional materials you received before you entered into the agreement.If you were not appropriately notified of the negative option billing, you should not have to pay the money. You may want to consult with a private attorney to discuss the specifics of your situation.  

Also, note that you do not have to pay for a credit monitoring service in order to review the information contained in your credit file. Under federal law, you are entitled to a free credit report every year, and under Georgia law you are entitled to two free reports. You may want to consider this option instead of paying a company for a similar service. To receive your free reports go to annualcreditreport.com or call 877-322-8228.

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Car Dealer Charging Usage Fees

November 19, 2010 17:36 by Consumer Ed

Dear Consumer Ed:

I purchased a new car and arranged for financing through the dealership. They said I could drive the car home that same day. Now, two weeks later, they say my financing was denied and I need to bring the car back AND pay a fee for the mileage I put on the car. Can they do that?

Consumer Ed says:

Possibly, yes.  You entered into a conditional sales agreement know as a "spot delivery" transaction-which is legal in Georgia.  Although you took possession of the car, you did not buy it.  You instead promised to buy the car if a lender would finance the deal according to terms you negotiated with the dealership.  The car therefore belongs to the dealership until a lender finances the deal.  Since the dealership was not able to find a lender to finance your deal, you must return the dealership's car and pay for using it.  The amount you must pay depends on the terms described in the paperwork you signed when you took delivery of the car. You probably signed a "Bailment Agreement," which allows you to use the car but requires you to pay usage fees if the deal falls through. Some contracts allow the dealership to deduct the usage fee from your deposit and/or the value of your trade-in vehicle.
 
"Spot delivery" transactions may be helpful in some cases; however, the practice can be abused if a dealership waits weeks or even months before notifying a customer that the deal could not be financed. The delay costs the customer usage fees, (which eats away at any down payment), and forces the customer to either give up the car or agree to additional fees or excessive financing terms.  Backing the customer into this corner is unnecessary.  Dealers have access to a customer's credit information before the customer leaves with the car. As a result, the dealership should know if the customer will qualify for a loan, or at least know the status of the customer's loan application, within a few days of the spot delivery.
 
No customer should be strong-armed into accepting a bad deal.  The best way to protect yourself is to refuse to accept a vehicle on spot delivery.  You may also want to arrange for financing through your bank or a third-party lender before you go to the dealership.  You should be able to leave the vehicle on the lot and then pick it up once financing is approved.
 
If you decide to accept a spot delivery, then be sure that you understand the terms to which you are agreeing - if you sign a bailment agreement, then read it.  Ask what is meant by "excessive mileage" and "excessive use" and ensure that these descriptions are clearly written in the bailment agreement.  You should be sure that the bailment agreement describes the method you must use to request a refund of your down payment.  Don't forget that the vehicle isn't yours until financing is approved, so don't treat it like you own it.  Understand that you may be responsible for excessive mileage and plan accordingly.  Finally, remember that if the dealership is unable to secure financing for you under the terms of the original agreement, then you can return the vehicle and request that the dealer return your down payment and trade-in.

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Should I sign 2-year contract with gym?

November 4, 2010 07:54 by Consumer Ed

Dear Consumer Ed:

The gym I want to join is asking me to sign a two-year contract. I’ve heard bad things about gym contracts. Should I sign it?

Consumer Ed says:

In Georgia, health clubs are required by law to have contracts with their members.  However, the individual gym can choose how long its contract lasts – from one month up to 36 months.  When you are deciding which health club to join, keep in mind that a shorter contract puts you at less risk in the event that you lose interest in your exercise regime or the health club goes out of business. 

You should also make sure you get a written copy of the contract at the time you sign it, and read it thoroughly.  Under Georgia law, health clubs are required to include certain provisions in their membership contracts.  A list of those provisions can be found on the Governor’s Office of Consumer Protection's website.  If a contract you have signed does not comply with the provisions required by law, you may legally cancel the agreement.

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