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Mailbox mystery with a clear bill

Why does your mailbox contain a cookbook you don't remember ordering _ and a bill for $19.95? The answer is a legal and increasingly popular sales method in which companies automatically bill consumers for products or services _ with the onus on consumers to decline the offer.

The method isn't new. But after decades of use by book of the month and music album clubs, a variety of companies are relying on it to sell everything from magazine subscriptions to cable channels to small-ticket items charged through credit cards.

Sellers like the practice because even if people lose interest in a product, sheer inertia may keep them from canceling an order.

However, recent violations are raising concern that the fast-growing "negative-option" method is forcing consumers to buy things they don't want, have no need for or can ill afford.

Criticism intensified recently when at least five states sued the nation's largest cable television operator, Tele-Communications Inc., for automatically billing customers for a new pay channel unless they called to cancel it.

The cable company incident reflects the growing skepticism over a procedure that makes it tough for buyers to beware _ because they're often unaware they're buyers.

"While there is consumer choice, it exists largely in theory, not in reality, because consumers do not have the time or interest in carefully reading all communications or in taking the time to inform a company they do not wish a service," said Stephen Brobeck, executive director of the Consumer Federation of America, a Washington-based consumer group.

Companies generally say their plans are legal because they adhere to Federal Trade Commission negative-option requirements that, for instance, consumers give prior written permission to be billed for unordered merchandise.

In addition, sellers say consumers are generally astute enough to know what they are getting into when they sign up for automatic renewal or negative-option plans.

The idea of inertia "underestimates our consumers. They are well aware of how to reach us," said Diane G. Potter, vice president in charge of circulation at Times Mirror Magazines Inc.

Potter says Times Mirror is considering a test of a new "Auto Renew" system from Robert A. Bader Associates Inc. in Mount Kisco. Twenty magazines began testing the service in April.

The automatic renewal system could save large millions of dollars a year for large magazines, which often send out as many as a dozen renewal notices a year per subscriber, says Dan Capell, editor of Capell Circulation Report, a newsletter based in Rye.

Critics argue that even within the letter of the law there is room for confusion.

"The key thing is whether the disclosure is adequate _ whether it is comprehended by nearly everyone who fills out the form and sends it in," said consumer advocate Brobeck.

States, which usually draw on federal law in this area to clarify their own, said cable operator TCI failed to provide enough ways for consumers to refuse the pay channel service, which costs from $1 to $5 a month extra.

TCI, based in Denver, bowed to state pressure this week and partly backed off the plan. It said it would indicate to subscribers on the payment form that they do not have to sign up for the service.

But officials in Florida and other states say they will continue to pursue legal action until TCI, among other things, issues a written agreement for subscribers to sign that authorizes the negative-option plan. The other states that have sued are Iowa, Missouri, Texas and Washington.

"(TCI is) setting precedent here. If they can do it now, it's an open door to walk through," said Jack Norris, chief of consumer litigation at the Florida attorney general's office. "This a gigantic issue."

Last year, the FTC accused Field Publications, publisher of Weekly Reader Books and other book plans, of shipping cookbooks and children's dictionaries to subscribers without their consent and charging them $15 to $20 apiece.

Field agreed to refrain from the practice and pay civil penalties of $175,000 under a consent decree filed in federal court in November.

"From our examinations of the Field case, it was our determination that people don't really like negative-option plans," said Angelo Presti, investigator in the FTC's New York regional office.

Yet negative-option plans continue to proliferate. American Express uses the method to sell things like calendars, pocket diaries and tax guides.

Bankcard Holders of America, a credit industry watchdog based in Herndon, Va., automatically renews its annual $18 dues for some members to reduce renewal costs. Members can call a toll-free number to get a full dues refund.

"The danger as a membership organization is if you don't do it correctly, you'll rapidly end up with a lot of unhappy members," director Elgie Holstein said.