Weight loss isn’t really a topic that I cover here at I’ve Tried That, but this post isn’t about weight loss. It’s about negative option billing practices and fraudulent Internet Marketers. I’ll explain why this is important after the story. Keep reading!

The FTC writes…

The 2010 FTC complaint alleged that two individuals and five related companies deceptively claimed that their Acai Pure supplement would cause rapid and substantial weight loss, and that their Colotox colon cleanser would prevent colon cancer. Also, despite claiming to offer a “free” trial for a nominal fee and full refunds upon request, the defendants allegedly repeatedly made unauthorized charges to consumers’ bank accounts, and made it all but impossible to avoid paying full price for the products, typically $39.95 to $59.95.

The FTC charged that the defendants violated the Federal Trade Commission Act, as well as the Electronic Fund Transfer Act and its implementing language, Regulation E.
At the request of the FTC in August 2010, a federal court halted the allegedly illegal conduct of the Central Coast Nutraceuticals defendants, imposed an asset freeze, and appointed a receiver to oversee the corporate defendants.

The settlement order against the defendants includes an $80 million judgment, which represents the total amount of consumer injury caused by their scheme. The monetary judgment will be suspended when the FTC receives assets worth approximately $1.5 million from the defendants.

The settlement order requires defendant Graham D. Gibson to pay the FTC the balance of his investment account; transfer to the FTC $500,000 after mortgaging his home in Phoenix, Arizona, or transfer the property to a court-appointed liquidator if he cannot obtain the mortgage; and divest himself of his interest in a Hawaii vacation property. It also requires the court-appointed receiver to transfer to the FTC the estimated $600,000 that will remain in the accounts of Central Coast Nutraceuticals and the affiliated corporate defendants after their outstanding expenses are paid. If it is later determined that the financial information the defendants provided was false, the full amount of the judgment will become due.

In addition to banning the defendants from selling any products or services with a negative option feature, the settlement also prohibits them from:

  • making deceptive statements that there is no cost for a trial purchase; that all consumers who request full refunds will get them; that celebrities such as Oprah Winfrey and Rachael Ray endorse their products; that consumer testimonials reflect typical consumer experiences; about the total amount consumers will pay; or about any other material fact regarding any goods or services sold by the defendants;
  • failing to make adequate disclosures about the material terms and conditions of any offer;
  • charging consumers’ credit cards, or debiting their bank accounts without their consent;
  • making any claim that a product can diagnose, cure, mitigate, treat, or prevent any disease, including cancer, unless the claim is approved by the Food and Drug Administration;
  • making any claim that a product can cause weight loss, unless the claim is supported by two well-controlled human clinical studies;
  • making claims about the health benefits of any supplement, food, or drug without competent and reliable scientific evidence, and misrepresenting any tests or studies;
  • making deceptive or false statements or failing to disclose material facts, to a payment processor or financial institution; and
  • violating the Electronic Funds Transfer Act and Regulation E.

Click here for the full press release.

Why This is Important

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It’s hard to see the connection there, but one does exist. It exists in the way both programs have been advertised and how they handle their billing practices. You’ve no doubt seen the ads on either Facebook, a NEWS website, or just about any other popular site out there. The ads go something like this:

“Local stay at home mom discovers secret to weight loss/white teeth/working from home/curing cancer/time travel! It’s the secret THEY don’t want you know about! Access the secret for free!”

They’re all the same. It’s a mom that discovered a “trick” to one of the world’s biggest problems and decided to sell that information to you for cheap. The only real trick, however, remains hidden within the billing practices of the company. There is no instant cure, but there are negative option billing terms that could cost you hundreds of dollars if you’re not careful. (If you want to learn more, I covered negative option billing with my Loral Langemeier post last week.)

Back to why this is important for us. There are a great number of work at home scams that are operating similar billing agreements to Central Coast Nutraceuticals. The work at home scams aren’t as bad because they’re not making outrageous health claims, but they’re still practicing unfair billing practices.

The fact that the FTC has stepped in, halted operations and fined the company $1.5 million dollars gives me hope for two reasons. 1. That other sites will stop practicing these unfair methods of billing out of fear and 2. the FTC will continue to prosecute other companies and assist consumers in getting their money back.

Central Coast Nutraceuticals is just a drop in the bucket. Here’s to hoping the FTC continues to prosecute. You can do your part to help by filing a Complain with the FTC by clicking here. If you’ve fallen victim to one of these scams, let them know!

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