"Desperate times are leading people to the Internet to apply for payday loans and many are falling deeper into debt after getting tangled up with a lender who has zero regard for the law," said Stephen A. Cox, President and CEO of the Council of Better Business Bureaus.

"Unlike a payday loan that you might get from a local business, online payday loans require your bank account number and, as a result, the borrower is at the mercy of the lender as more money than they counted on is withdrawn from his or her account."

Hundreds of people have complained to the BBB after signing up for a payday loan on sites like OnceClickCash, 500Fastcash and rbloans. Consumers complaints said they agreed to what they thought was a one-time payday loan, usually a few hundred dollars to be paid off in two weeks. They provided their bank account information to the lender and the money was then deposited.

The arrangement leads to a debt spiral.  All of the subsequent payments went toward paying off recurring finance charges and never toward the principal. As a result, consumers report paying two and three times the amount of the original loan and still having the same amount of principal to payoff.  One Massachusetts woman who received a loan from Ace Cash Services said she made over $1,700 in payments to payoff a $225 loan.

Many consumers were surprised to hear that the online lender was not licensed by the state and charged interest rates well over what was allowed by their state laws. When confronted, the lender usually responds they don’t have to follow state or federal laws, claiming they are based in another country or on a Native American reservation.

"The bottom line here is that if you are handing over your bank account information online to get a payday loan without doing your research, you are setting yourself up to pay hundreds and even thousands of dollars more than you bargained for," added Cox.

The Director of the FTC’s Bureau of Consumer Protection, David C. Vladeck, along with officials from Visa and the Better Business Bureau (BBB) are cautioning consumers about the free trial feature, known as a "negative option." In a negative option feature, a company takes a consumer’s failure to cancel a free trial offer as permission to begin charging for the service.

 The FTC says many businesses use this billing process appropriately, others pre-check consent boxes, bury details of the offers in fine print, terms and conditions, and make cancellations or returns difficult, landing people in a cycle of recurring charges for products and services they do not want.

"Free trial marketing can be convenient for consumers-if the terms are clearly spelled out beforehand," Vladeck said. "Legitimate marketers don’t hide critical information about costs or cancellation policies to get their customers to agree to future charges."

The FTC, Visa and the BBB offer the following tips to online shoppers on how to spot misleading free trial offers and how to deal with unauthorized charges:

•     Take time to read and understand all terms and conditions, so a free trial doesn’t turn into a costly purchase you didn’t intend to make.
•     Pay particular attention to any pre-checked boxes before you submit your payment card information for an order. Failing to un-check the boxes may bind you to terms and conditions you don’t want.
•     Review credit card statements when you get them for any unauthorized charges, and notify the card issuer promptly of any unusual activity or unauthorized charges.
•     Try to resolve the situation with the merchant. If you’re unsuccessful, contact the card issuer immediately to dispute the charge.

Consumers who think they have been victims of deceptive marketing and who have not been able to resolve the issue with the merchant should call their credit card company to dispute the charge. Consumers can also file a complaint with the FTC or their local BBB.
 

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Groups involved are the American Association of Advertising Agencies (AAAA), the Association of National Advertisers (ANA), the Direct Marketing Association (DMA), the Council of Better Business Bureaus (BBB), and of course the Interactive Advertising Bureau (IAB).

"Consumers deserve transparency regarding the collection and use of their data for behavioral advertising purposes. I am gratified that a group of influential associations – representing a significant component of the Internet community – has responded to so many of the privacy concerns raised by my colleagues and myself,” says Federal Trade Commission (FTC) Commissioner Pamela Jones Harbour.

What Google Has to Say

Google recently testified in Washington regarding privacy and advertising. Highlighted in the testimony were three main topics:

- Google’s main advertising products and the benefits Google believes online advertising brings to advertisers, online publishers, and individual Internet users

- Google’s approach to privacy, specific steps that the company takes to protect users’ privacy, and the release of interest-based advertising

- Ideas and recommendations for how to better protect Internet users’ privacy with respect to advertising, as well as more generally

You can read the entire testimony here (pdf).

In a post on Google Public Policy Blog today, Google Managing Policy Counsel Pablo Chavez talked about the principles and Google’s own behavioral-based or "interest-based" advertising.

"When we launched our own interest-based advertising product in March, we worked hard to include several innovative features to give users more control and information — including ads labeled ‘Ads by Google,’ a tool called the Ads Preferences Manager (which lets users view, add, and remove the categories that are used to show them interest-based ads), and the choice to opt out of interest-based ads altogether," says Chavez.

"One of the key strengths of the principles is the fact that they apply to a broad range of companies participating in online advertising — advertisers, publishers, and ad networks," adds Chavez. "Of course, for any self-regulatory effort to be effective, there has to be some kind of enforcement process. Between now and early 2010 — when the principles are expected to be implemented — the Better Business Bureau and Direct Marketing Association, two of the groups involved, will work to set up that process to make sure it has real teeth."

The Principles

So what are these principles? There are seven of them:

1. The Education Principle
2. The Transparency Principle
3a. The Consumer Control Principle
3b.The Consumer Control Principle (applies to service providers)
4. The Data Security Principle
5. The Material Changes Principle
6. The Sensitive Data Principle
7. The Accountability Principle

I won’t get into all of the specific details of each one here, but you can read the entire document here if you are interested. Either way, it is good to see that these organizations are taking consumer privacy this seriously.

One scam on Facebook is the "friends in distress" ploy. Facebook users receive a message in their inbox from a friend saying they are in trouble and need money wired to them. The recipient of the message does not know that their friend’s account has been hacked and the message was sent by scammers. If the Facebook users do wire the money to the scammers, they have no way to recover it.

"Social networking is extremely popular because it allows us to connect and reconnect with people we know and trust," said Steve Cox, BBB spokesperson.

"Scammers know that they can take advantage of that trust by masquerading as friends, families, and coworkers in order to easily disseminate viruses or steal personal information such as bank or credit card numbers."

Another Facebook scam claims that users pictures are public. The user receives a post on their wall from a friend saying something like, "hey do u realize your Facebook picture is all over <link to Web site>". The wall posts vary, but all of them link to an outside Web site that supposedly has the user’s photos.

Facebook warns that clicking on the link will allow hackers to gain access to the user’s account and post the same message on their friend’s walls.

BBB offers the following advice for staying safe on social networking sites:

•  Be extremely wary of messages from friends or strangers that direct the user to another Web site via a hyperlink.
•  Before wiring money to a friend in a jam, users should attempt to contact their friend outside of the social networking site, such as over the phone or via e-mail to confirm the situation. If that’s not possible, BBB recommends asking them a question that only they would know the answer to.
•  Users should always make sure their computer’s operating system and antivirus and firewall software are up to date.
•  Social networking sites are about sharing information, but BBB recommends that users take steps to keep important information private. While some social networking Web sites do allow for the user to share phone numbers and addresses, it’s best to keep such information private.
•  Be selective when choosing friends. While a user might not want to be rude, BBB recommends that it’s best to decline a request for friendship if the user doesn’t actually know the person.