Companies make such promises all the time, capping off the pitch by saying you can cancel at any time during your "free trial" period.
All you have to pay is a small shipping and handling charge to your credit or debit card, as little as $1.99.
So what really happens?
After you sign up and give your credit card number, your plastic is bombarded with recurring charges that quickly add up to hundreds or thousands of dollars. You may receive multiple "monthly" orders shipped within days of each other for merchandise you wanted — and maybe charges for stuff you received or never asked for.
When you try to stop the deliveries and cancel your membership, your phone calls, emails or letters to the company go ignored.
And if you dispute the charges with your credit card company, you could spend months resolving the issue. Sometimes, it's not just you, but your credit card company or bank that's getting tricked.
Such was the case, says the Federal Trade Commission, with the Internet enterprise I Works, which the agency sued for allegedly creating 51 shell companies to fly under the radar of credit card companies and keep fraudulent charges going even after customers took action.
The scheme worked like this, according to the FTC: The company first lured customers into free trial memberships ($1.99 shipping and handling fee) by offering informational material on how to get government grants and make big money working at home. Then the company charged up to $130 in annual fees, and recurring $60 monthly charges for useless information, as well as charging for items never ordered, the FTC contends.
After numerous customers complained to their credit card issuers and banks, these institutions canceled the charges and barred the company from making future transactions. But in fact, just one of those 51 I Works shell companies was getting frozen out. Others, each with its own fake list of executives, kept the scam going, tricking financial institutions into continuing to collect money for them. I Works and its 10 executives named in the lawsuit took in millions this way, the FTC says.
Phone and email messages from Scam Alert to the I Works corporate office in Utah were not returned. On an affiliated website, the company called the FTC action a "witch hunt" and denied allegations that customers were illegally charged or shipped products they didn't order.
Bottom line: Be wary of free trial offers like these.
Also keep in mind that some well-known companies may try to ding you with a more benign form of this marketing tactic. They deliver what they promise in a free trial and don't send you things you didn't request, but they count on you being too busy or distracted to cancel the trial on time.
What You Need to Know
- A cancellation window generally starts the second you place your initial order. In some cases, your merchandise will not be shipped until after the period has ended — in hopes that you won't cancel until you've received your first item.
- Despite claims of money-back guarantees, many consumers find they can't reach company reps to get refunds.
- Many third-party endorsements are simply made up. And claims for "as seen on" legitimate news websites may actually refer to paid advertisements on that site — not bona fide news stories.
- Many health products ordered via free trial memberships cost far more than their counterparts on store shelves, which have no monthly memberships and can be more easily returned with a receipt.
- Promises you'll get secrets of government grants that pay for personal expenses or work-at-home arrangements generating thousands a week aren't worth believing. Legitimate government grants are typically for student aid, for conducting research or for businesses in particular industries.
- In any case, instructions on how to apply for government grants are available for free on Grants.gov as well as Studentaid.ed.gov, Govbenefits.gov and Sba.gov.
Sid Kirchheimer is the author of Scam-Proof Your Life, published by AARP Books/Sterling.
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