Have you ever been a member of a book of the month club? How about a monthly music club? Perhaps you’ve found several months of charges on your credit card for some type of credit monitoring service. A real favorite, shopping discount clubs that charge you periodically for the luxury to purchase items for some predetermined discounted pricing?

If you’re able to answer yes to any of these questions, you’ve been involved with what the Federal Trade Commission refers to as Negative Option Marketing.

As the FTC puts it:

Negative option turns the sales transaction around. Instead of the merchant having to “sell” you a product or service, it starts with the assumption that you’ve already bought it. It’s up to you, the consumer, to contact the merchant and cancel the order if you don’t want to complete the transaction.

When companies entice you to accept their products or services by offering you free or extremely inexpensive items, they usually require you to accept a long term agreement where you’ll eventually purchase some amount of product from them. If you don’t, you’ll be treated as a bad debtor, turned over to collections and eventually have negative marks placed on your credit report.

Is it considered bad? Answering this question is a bit tougher. Did you agree to receive those 6 music CDs for all of 1 cent (plus shipping and handling charges which are probably high enough to actually pay the company for giving them to you for only a penny)? If you agreed, did you realize you were agreeing to buy so many more compact discs from them over some period of time?

Don’t answer yet! Did you also realize you would be receiving in the U.S. Postal Mail every month a notification that selections related to your interests would be sent to you automatically? At your convenience? Simply disregard that monthly notice and the selection will be sent to you at full club prices, plus shipping and handling (again, more than the actual cost of the CD and postage.)

If you’ve entered these arrangements with full knowledge then you’ll answer that these Negative Option Marketing agreements are perfectly fine. If on the other hand, you’ve been mislead, or worse, not had all of the information about potential ramifications delivered to you prior to receiving product and being charged, then you might want to consider that NOM is not all that savory a proposition to be in.

What can you do if you discover that you’ve been mislead by a company regarding your liability to them for payments due a product or service you’ve received?

Here are a few steps you might be able to take to defend yourself:

1. First, always make sure you read the fine print for offers that come to you unsolicited. Read the fine print for solicited offers as well. Just be sure to fully understand everything you can prior to returning a “yes” notification.
2. Make sure you’re not being taken advantage of over the lifetime of the agreement. Do the math. Factor the cost of the free or cheap stuff you’re getting now with the full price stuff you’ll need to buy later. Often you’re really not getting much of a deal.
3. Understand that many states have passed “Free Gift Laws” that basically state you can keep unordered merchandise with no obligation to pay for it. Be sure this is the case and you didn’t inadvertantly return some document or acceptance card to the company.
4. Many companies will periodically offer you deals to reduce your total obligation if you participate in a current promotion. Determine if this option will work for you and opt to take it if it gets you out sooner, and cheaper.

Ultimately, you’ll want to be aware of the agreements you make. Regardless of how tricky some of these Negative Option Marketers get, you can out smart them by not getting entangled in their deceitful webs.