Setting Up an Online Business

Reprinted from SBA.gov.

Setting up your business on the Internet can be a lucrative way to attract customers, expand your market and increase sales. For the most part, the steps to starting an online business are the same as starting any business. However, doing business online comes with additional legal and financial considerations, particularly in the areas of privacy, security, copyright and taxation.

Rules and regulations for conducting e-commerce apply mainly to online retailers and other businesses that perform consumer transactions by collecting customer data. However, even if you do not sell anything online, laws covering digital rights and online advertising may still apply to you.

The Federal Trade Commission (FTC) is the primary federal agency regulating e-commerce activities, including use of commercial emails, online advertising and consumer privacy. FTC’s Online Advertising and Marketing provides an overview of e-commerce rules and regulations.

The following topics provide further information on how to comply with laws and regulations related to e-commerce.

Protecting Your Customers’ Privacy

Learn the necessary steps you should take to protect your customers from identity theft and other misuses of their personal information. Any business that collects personal or financial data either through online sales, credit reports or applications should understand these rules and regulations.

Collecting Sales Tax Over the Internet

If you a run business with a physical storefront, collecting sales tax is pretty straightforward: you charge your customers the sales tax required by the jurisdiction where your business is located. For example, if you operate a retail store in Nashville, Tenn., you collect both state and local sales taxes from customers buying merchandise at your store.

But suppose you start selling your products online. Does that mean you charge them the same sales taxes that you do to those coming into your store? It depends.

If your business has a physical presence in a state, such as a store, office or warehouse, you must collect applicable state and local sales tax from your customers. If you do not have a presence in a particular state, you are not required to collect sales taxes. In legal terms, this physical presence is known as a “nexus.” Each state defines nexus differently, but all agree that if you have a store or office of some sort, a nexus exists. If you are uncertain, whether or not your business qualifies as a physical presence, contact your state’s revenue agency. If you do not have a physical presence in a state, you are not required to collect sales taxes from customers in that state.

This rule is based on a 1992 Supreme Court ruling (Quill v. North Dakota, 504 U.S. 298, (1992)) in which the justices ruled that states cannot require mail-order businesses, and by extension, online retailers to collect sales tax unless they have a physical presence in the state. The Court reasoned that forcing sellers to comply with over 7,500 tax jurisdictions was too complex for sellers to manage, and would put a strain on interstate commerce.

Keep in mind that not every state and locality has a sales tax. Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon do not have a sales tax. In addition, most states have tax exemptions on certain items, such as food or clothing. If you are charging sales tax, you need be familiar with applicable rates.

Determining which sales tax to charge can be a challenge. Many online retailers use online shopping cart services to handle their sales transactions. Several of these services are programmed to calculate sales tax rates for you.

Digital Rights/Copyright

Personal data is not the only thing protected on the Internet. Digital works, including text, movies, music and art are copyrighted and protected via the Digital Millenium Copyright Act (DMCA). The DMCA offers a number of protections for information published to the Internet, as well as other forms of electronic information. Among its many provisions, the DMCA:

  • Limits Internet service providers from copyright infringement liability for simply transmitting information over the Internet. However, service providers, are expected to, upon notification, remove material from its web sites that appear to constitute copyright infringement.
  • Limits liability of nonprofit educational institutions for copyright infringement by faculty members or graduate students.
  • Makes it a crime to circumvent anti-piracy measures built into most commercial software. However, reverse engineering of copyright protection devices is permitted to conduct encryption research, assess product interoperability, and test computer security systems.
  • Provides exemptions from anti-circumvention provisions for nonprofit libraries, archives, and educational institutions solely for the purpose of making a good faith determination as to whether they wish to obtain authorized access to the work.
  • Outlaws the manufacture, sale or distribution of devices used to illegally copy software.
  • Requires that “webcasters” pay licensing fees to record companies.

The Lawyer Referral Service of the New Hampshire Bar Association can refer you to attorneys who specifically handle e-commerce matters.  Call 603-229-0002 or request a referral.

In Bankruptcy, What Property Can I Keep?

Bankruptcy CourtIn a bankruptcy case, you can keep all property which the law says is “exempt” from the claims of creditors. You can choose between state law exemptions or federal law exemptions.

Federal exemptions include:

  • $15,000 equity in your home;
  • $2,400 in equity in your car;
  • $400 per item in any household goods up to a total of $8000;
  • $1,000.00 in jewelry;
  • $1,500 in things you need for your job (tools, books, etc,);
  • $800 in any property, plus part of the unused exemption in your home, up to $7,500;
  • Your right to receive certain benefits such as social security, unemployment compensation, veteran’s benefits, public assistance, and pensions regardless of the amount.

You must have lived in New Hampshire for the last two years to use the New Hampshire exemption laws. New Hampshire exemptions include:

  • $100,000 in equity in your home
  • $4,000 equity in you car
  • Up to $3,500 in household furnishings
  • $5,000 in things you need for your job (i.e. tools, books, etc.)
  • $1,000 in any property plus up to $7,000 of unused other exemptions
  • $500 in jewelry
  • Most retirement plans, social security, unemployment and other public assistance benefits
  • New Hampshire law also protects up to 6 sheep, one hog, one pig, and either a horse a cow or a yoke of oxen.

The exemption amounts are doubled when a married couple files together.

In determining whether property is exempt, you must keep a few things in mind. First, property value is not the amount you paid for it, but what it is worth today. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement.

Further, you only need to look at the equity in your property. This means that you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $50,000 house with a $40,000 mortgage, you have $10,000 of equity in your property. Under New Hampshire exemptions, if the equity is under $100,000, the property is fully protected. In this case, the property if fully protected.

For more information regarding bankruptcy, read the entire pamphlet entitled “Bankruptcy” from the New Hampshire Bar Association.

Remember, the law often changes and each case is different.  This information was meant to give general information and should not be considered a substitute for legal advice.

A decision to file bankruptcy should be made only after determining that bankruptcy is the best way to deal with your financial situation.  A consultation with an experience bankruptcy attorney can help.  Call the Lawyer Referral Service of the New Hampshire Bar Association today for a referral at 603-229-0002 or request a referral online.

 

Consumer Protection Watchdog Announces Action Against Capital One

Press Release: Jul 18 2012

CFPB probe into Capital One credit card marketing results in $140 million consumer refund

WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) announced its first public enforcement action with an order requiring Capital One Bank (U.S.A.), N.A. to refund approximately $140 million to two million customers and pay an additional $25 million penalty. This action results from a CFPB examination that identified deceptive marketing tactics used by Capital One’s vendors to pressure or mislead consumers into paying for “add-on products” such as payment protection and credit monitoring when they activated their credit cards.

“Today’s action puts $140 million back in the pockets of two million Capital One customers who were pressured or misled into buying credit card products they didn’t understand, didn’t want, or in some cases, couldn’t even use,” said CFPB Director Richard Cordray. “We are putting companies on notice that these deceptive practices are against the law and will not be tolerated.”

Through the supervision process, CFPB’s examiners discovered Capital One’s call-center vendors engaged in deceptive tactics to sell the company’s credit card add-on products. These products included “payment protection,” which allows consumers to request that the bank cancel up to 12 months of minimum payments – roughly one percent of their credit card balance – if they encounter certain life events like unemployment and temporary disability. It also provides debt forgiveness in the event of death or permanent disability. Another product was “credit monitoring,” with services such as identity-theft protection, access to “credit education specialists,” and, in some cases, daily monitoring and notification.

Consumers with low credit scores or low credit limits were offered these products by Capital One’s call-center vendors when they called to have their new credit cards activated. As part of the high-pressure tactics Capital One representatives used to sell these add-on products, consumers were:

  • Misled about the benefits of the products: Consumers were sometimes led to believe that the product would improve their credit scores and help them increase the credit limit on their Capital One credit card.
  • Deceived about the nature of the products: Consumers were not always told that buying the products was optional. In other cases, consumers were wrongly told they were required to purchase the product in order to receive full information about it, but that they could cancel the product if they were not satisfied. Many of these consumers later had difficulty canceling when they called to do so.
  • Misled about eligibility:  Although most of the payment protection benefits kicked in when consumers became disabled or lost a job, some call center representatives marketed and sold the product to ineligible unemployed and disabled consumers. Despite paying the full fees, they could not get all the benefits of payment protection; some later filed claims that were denied because their “loss” (e.g. loss of job or onset of disability) occurred prior to enrollment.
  • Misinformed about cost of the products:  Consumers were sometimes led to believe that they would be enrolling in a free product rather than making a purchase.
  • Enrolled without their consent:   Some call center vendors processed the add-on product purchases without the consumer’s consent. Consumers were then automatically billed for the product and often had trouble cancelling the product when they called to do so.

Enforcement Action
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to issue Consent Orders and take action against institutions engaging in unfair, deceptive, or abusive practices. To ensure that all affected consumers are repaid and that consumers are no longer subject to these misleading and high-pressure tactics, Capital One has agreed to:

  1. End deceptive marketing: Capital One has ceased all marketing of these products, and will not resume doing so until Capital One submits a compliance plan, acceptable to the Bureau, which helps ensure these unlawful acts do not occur in the future.
  2. Complete repayment, plus interest, to two million consumers:  Capital One will pay approximately $140 million to all of the estimated two million consumers who either initially enrolled in a product on or after August 1, 2010, or who tried to cancel a product on or after August 1, 2010, but were persuaded to keep the product after speaking with a call center representative. In addition to the amount paid for the product, cardmembers will receive a refund of the associated finance charges, any over-the-limit fees resulting from the charge for the product, and interest.
  3. Pay claims denied based on ineligibility at enrollment:  For any of these eligible consumers whose payment protection claims were previously denied because their loss occurred prior to enrollment (because of unemployment, disability, etc.), Capital One will pay their claims as if they had been eligible, if that amount is greater than the refund for that consumer.
  4. Convenient repayment for consumers:  If the consumers are still Capital One customers, they will receive a credit to their accounts. If they are no longer a Capital One credit card holder, they will receive a check in the mail. Consumers are not required to take any action to receive their credit or check.
  5. Independent audit:  Compliance with the terms of this agreement will be assured through the work of an independent auditor, who will determine if Capital One has complied with the CFPB’s Consent Order.
  6. $25 million penalty:  Capital One will make a $25 million penalty payment to the CFPB’s Civil Penalty Fund.

Today’s action is being taken in coordination with the Office of the Comptroller of the Currency (OCC), which is separately ordering restitution of approximately $150 million from Capital One. This amount includes the same $140 million refund to be paid to the approximately two million customers harmed by the deceptive marketing practices identified by the CFPB’s examiners. The OCC’s order also includes separate restitution for additional consumers harmed by unfair billing practices taking place between May 2002 and June 2011 in violation of Section 5 of the Federal Trade Commission (FTC) Act. For the combined activity, the OCC is assessing a $35 million civil money penalty against Capital One.

In conjunction with today’s enforcement action, the Bureau is releasing two Consumer Advisories. One advisory is intended to make Capital One customers aware of today’s action and the other serves as a general warning to consumers who may encounter such deceptive practices.

Complaints received by the CFPB indicate – and the Bureau’s supervisory experience confirms – that other consumers have been misled by the marketing and sales practices associated with credit card add-on products. To further protect consumers, the Bureau is issuing a compliance bulletin that puts other institutions on notice that the CFPB will not tolerate deceptive marketing practices, and institutions will be held responsible for the actions of their third-party vendors. Companies engaging in deceptive practices will be expected to refund fees paid by consumers and, particularly where practices are widespread, pay an appropriate penalty.

The full text of the CFPB’s Consent Order

A factsheet on the Consent Order.

Find out how Capital One will handle refunds.

Beware of Smishing!

Smishing is when a scam artist pretends to be a lottery business on your cell phone.   They say you are a winner and ask for your bank information. The calls are computerized and are just calling numbers at random, which is how they get your cellphone number. Watch this video by the Better Business Bureau for more information.

 

 

If you have been “SMISHED” or otherwise scammed, the Lawyer Referral Service of the New Hampshire Bar Association can refer you to an attorney who may be able to assist you with sorting out the financial mess created by the scam artists. Call 603-229-0002 or request an online referral.

Campus Debit Cards May Carry Hidden Fees

According to a report by the United States Public Interest Research Group (USPIRG)  many banks are taking advantage of students who need campus debit cards to access their financial aid.  They may appear to be an easy low-cost solution to handling finances while in school, but many of these cards carry excessive hidden fees.

“Campus debit cards are wolves in sheep’s clothing,” Rich Williams, one of the co-authors of the USPIRG report, said in a recent press release,  “Students think they can access their dollars freely, but instead their aid is being eaten up in fees.”

Although campus debit cards are not required to access a student’s financial aid, many banks market their product directly on colleges’ financial aid websites, often creating the perception of being the only option.

Debit cards have received less federal oversight. And, according to a study, by the United States Public Interest Research Group Education Fund, an advocacy organization, nearly 900 colleges and universities have card relationships with banks or other financial institutions, some of which manage student aid disbursements by turning student IDs into debit cards. Some schools save money by outsourcing administrative costs. Others receive payments from the banks.

Read the entire article by Jeff Ousley at Veteransunited.com

 

 

Receive Scam Alerts

Sign up to receive scam alerts  through email from the NH Consumer Education Partnership, formed by the NH Banking Department, the NH Insurance Department, the NH State Treasury, the University of New Hampshire Cooperative Extension, and the NH Attorney General’s Consumer Protection Bureau.

http://www.nh.gov/consumer/

If you think you may have been scammed or suspect your identity may have been stolen, the Lawyer Referral Service can refer you to attorneys who have experience assisting people with consumer law and/or identity theft issues.  Call 603-229-0009 or fill out the online request form.