States were especially concerned with Time Inc.'s automatic renewal procedures, which allegedly resulted in consumers being charged for unwanted magazines.
Time Inc. has agreed to change several key marketing and billing practices in the wake of State Attorney Generals'concerns that Time was billing consumers or charging their credit cards for unwanted magazine subscriptions.
"One of our top concerns was that Time Inc. quietly initiated an automatic renewal method without clearly notifying consumers that they had to cancel a subscription if they didn't want it renewed," Iowa Attorney General Tom Miller said.
"Some consumers' subscriptions were renewed despite their desire to let them end, and then some consumers faced heavy-handed collection efforts by Time Inc. when they refused to pay."
The States alleged that the automatic renewal method altered a long-standing industry practice of subscriptions being renewed at the end of a subscription period only if the customer affirmatively requested a renewal.
Under an agreement finalized today with a total of 23 states:
- Time Inc. will clearly give consumers the opportunity for the next five years to affirmatively indicate whether they want the automatic renewal option when subscriptions are scheduled to expire. Time will remind customers in writing before the end of a subscription period of the automatic renewal term, of their right to cancel the subscription, and of the procedure for cancellation.
- Time Inc. will honor all requests to cancel subscriptions as soon as reasonably possible. If customers are charged for magazines they did not order, Time will refund the subscription price.
- Time Inc. will not mail solicitations to consumers that resemble bills, invoices or statements of accounts due.
- Time Inc. will reform its billing and collection practices regarding threats to a consumer's credit standing. Time Inc. will not refer to a "bad debt file," a "consumer credit index" or similar terms that imply or represent that a consumer's debt will be reported to a credit reporting agency. In addition, Time will not submit unpaid accounts of automatic renewal customers for third party collections. Time will not represent that it intends to take legal action against a customer unless legal action is imminent.
- Time Inc. will refund $4.3 million to more than 108,000 eligible consumers who made payments for magazine subscriptions that were automatically renewed between 1998 and May of 2004. Time Inc. also will pay $4.5 million to the States for their costs of the case and for consumer protection litigation and education. States said that in addition to the important reforms in Time's sales practices, the settlement serves to return money to consumers and to penalize Time for conduct the States argued violated consumer fraud laws.
In Iowa, 1,574 consumers will be eligible for a total of $61,636.77 in restitution. Within three months, Time Inc. will send refund letters and claim forms approved by the States directly to consumers who are eligible. (Consumers are identified in Time Inc. records and do not need to contact Attorney General offices to qualify for a refund.) Time must send the forms in an envelope that clearly says "Refund Offer Enclosed."
Time Inc. publishes TIME Magazine, Sports Illustrated, People, Fortune, Money, Entertainment Weekly, and many other magazines. According to its web site, it publishes over 150 magazines worldwide, and two out of three U.S. adults read a Time Inc. magazine every month.
Additional information on the Time Inc. agreement with the States:
The agreement with the States is called an "Assurance of Voluntary Compliance." It was reached between Time Inc. and the Attorneys General of AK, CA, DE, FL, HA, IL, IA, ME, MD, MI, MO, NV, NJ, NM, NY, OH, OR, PA, TN, TX, VA, WV, and WI. [Click here for a copy of the "Assurance".]
Time Inc. denied the States' allegations but agreed to provide clear and conspicuous disclosures to consumers concerning all of the material terms for automatic subscription renewals, and agreed to other terms of the "Assurance."
Regarding collection practices, the States argued that Time Inc. sometimes used heavy-handed collection practices that threatened the credit standing of consumers who did not fall in line, even though many of those consumers understandably felt that they were being billed for a subscription they had never purchased.
Regarding solicitations that appeared to look like invoices, the States argued that Time Inc. used direct mail solicitations formatted similarly to its invoices, which may have violated Federal and state laws that prohibit such solicitations without certain conspicuous disclosures that an item is not an invoice. The "Assurance" notes that the States believe that Time engaged in business conduct that had the capacity to be deceptive and misleading in violation of state consumer protection laws. For example, a busy consumer -- or sometimes a small business, such as a doctor's office or dentist's office -- might receive what looks like an invoice for a magazine, and pay it, even though it was in fact a solicitation.
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