New Limits for Online Data-Pass and Negative Option Marketing Expected

Many affiliate marketers and lead generators engage in advertising and marketing for affiliates and customers that rely upon easy access to personal financial information and the sale of goods or services through negative option marketing. But, now online advertisers, marketers and merchants will have to comply with a new set of requirements under the “Restore Online Shoppers’ Confidence Act,” S. 3386 (the “Act”). The Act, which was championed by Senator Jay Rockefeller (D-WV) and supported by the Federal Trade Commission (the “FTC”), and was signed into law by President Obama on December 29, 2010.

The Act addresses online “data-pass” of billing information to post-transaction sellers, requirements for obtaining billing information, and restricts the use of negative-option marketing. Further, the obligations in the Act are on top of rules that the federal banking agencies, credit card associations and payment processors have already in place related to online advertising. As a result, lead generators and affiliate marketers will need to review their advertising and revenue sources carefully under the new regime.

The Act imposes three new obligations for online sellers:

1. Post Transaction Data-Pass Prohibition. The Act prohibits merchants from sharing financial account numbers and “other billing information” used to charge the customer with “third-party sellers”