The Federal Trade Commission has added protections for consumers pursuing “work-from-home” programs with changes to its Business Opportunity Rule that become effective March 1, 2012.
The changes simplify the disclosures that business opportunity sellers must provide to prospective buyers.
The simplified disclosures will also help prospective buyers review the risks of investing in a business opportunity, whether its “work-from-home” plans or more traditional vending machine or other franchising opportunities.
But it’s the “work-from-home” offers — such as envelope stuffing and craft assembly opportunities — that are much more prevalent and are the focus of the expanded FTC Rule.
The new Rule requires business opportunity sellers to give consumers specific information for helping them evaluate an opportunity. Sellers must disclose five key items of information in a simple, one-page document:
- The seller’s identifying information;
- Whether the seller makes a claim about the purchaser’s likely earnings (and, if the seller checks the “yes” box, the seller must provide information supporting any such claims);
- Whether the seller, its affiliates or key personnel have been involved in certain legal actions (and, if yes, a separate list of those actions);
- Whether the seller has a cancellation or refund policy (and, if yes, a separate document stating the material terms of such policies); and
- A list of persons who bought the business opportunity within the previous three years.
Teresa Yeast, a stay-at-home mother, purchased a craft-assembly “work-at-home” program from the company, Darling Angel Pin Creations. Last year, the FTC accused the company of falsely claiming that consumers could make hundreds of dollars assembling angel pins at home.
“It’s important to be skeptical and to be cautionary when you’re approached with … a business opportunity,” Yeast is quoted as saying on the FTC’s website. “I saw an opportunity that looked great, and took it. They took my money.”
The FTC provides opportunity sellers with compliance obligations at Selling a Work-at-Home or Other Business Opportunity? Revised Rule May Apply to You; or they can watch this new video.
Consumers considering buying a business opportunity should read: Looking to Earn Extra Income? Rule Helps You Avoid Bogus Business Opportunity Offers to learn more about the Rule.