The Council frequently receives complaints against private companies that market subscriptions for group participation in lotteries run by *"Mifal Hapayis" and **the "Council for Regulation of Sports Betting (Toto/Winner)", because of their aggressive sales techniques, deceptive practices, and the obstacles that they place in the way of those wanting to cancel the subscription. The Council assists consumers in filing legal action in the Small Claims Court to cancel this type of transaction, and to obtain suitable compensation.
* Mifal Hapayis - Israel's national lottery board, which is the only organization licensed to conduct lotteries and similar competitions in Israel.
** Council for Regulation of Sports Betting (Toto/Winner) - a statutory body entrusted with the management of sports betting in Israel.
Every year, the Israel Consumer Council receives dozens of complaints against private companies selling subscriptions for group participation in lotteries run by "Mifal Hapayis" and "the Council for Regulation of Sports Betting in Israel".
There are a number of companies operating in this industry. Company representatives usually contact consumers by phone. According to the companies’ websites, they offer consumers an opportunity to join a group of subscribers. The company uses experts in the field of lottery statistics, who choose lottery numbers on a statistical basis, thus increasing the chances of winning. The company submits the entry forms on behalf of the group. When the group as a whole wins, the monetary prize is divided up among the group’s members. However, complaints by consumers indicate that the picture is very different.
The complaints received by the Council, in almost all cases, raise a strong suspicion that consumers are victimized by the companies’ aggressive marketing methods, or by their misrepresentations and deceptive practices. Company representatives contact consumers by phone, and attempt to induce them to subscribe, promising them assured wins and a large chance of receiving money on an ongoing basis. Other promises include gifts such as vacations, vacuum cleaners or gift vouchers, but these can often be used or redeemed if the consumer signs up for a subscription during the course of the initial telephone call.
After the fact, it turns out that many of the claims made during the telephone call are incorrect. The gifts are not actually gifts, but depend on the amount of money spent on the lotteries and the length of the subscription; in other cases, things that were offered for free turn out to have a price attached.
The representatives attempt to obtain the consumer’s credit card number, using various pretexts (winning a prize, for example, for which a delivery charge fee must be paid), and sometimes the consumer agrees to make a one-time payment which turns out later to be a monthly charge.
The complaints also indicate that the consumers themselves do not always understand with whom the transaction is being made. Many believe that they are speaking with official representatives of the Lotto or Mifal Hapayis organizations (which are under State supervision), rather than a private company that is not supervised.
Difficulties in canceling transactions and demands for high cancelation fees.
In those instances in which consumers have agreed to enter into a subscription, some later attempt to cancel the transaction. This may be for a variety of reasons, among them, the fact that they have realized that participation was not free, or that a payment that was described as a one-time payment turned out to be a monthly credit card charge. However, when they try to cancel the arrangement, the consumers encounter various obstacles, such as:
• Difficulty in locating the company.
• Difficulty in canceling a payment installment transaction through a credit card company.
• The demand for a cancelation fee equal to 80% of the value of the transaction, and threats by company representatives to take legal action should the consumer refuse to pay, even though the law allows a distance sales transaction (one in which the customer is not in the premises of the seller) to be canceled within 14 days of receipt of the disclosure document, less a cancelation fee of 5% or 100 NIS, whichever is the lower.
• Consumers who claimed that they were told something different were told that the conversation was recorded, but when they asked to hear the recording, they were asked to pay hundreds of shekels for this service, or their request was denied.
Refusal to provide documents, as required by law
According to the law, because most of these transactions are carried out by phone, and are considered aslong-distance transactions, the company is obligated to provide the customer with a written disclosure statement, which includes, among other things, information on the customer’s right to cancel the transaction.
Complaints have been received from consumers that such a statement has not been provided to them, and that, when a dispute arose, they were referred to regulation appearing on the company’s website. This is in spite of the fact that the law states that, as long as a disclosure statement has not been provided, the transaction may be canceled as stated above.
The Consumer Council’s Actions
The Consumer Council has assisted consumers in pursuing complaints against these businesses. Where these companies fail to cancel a transaction, or the consumer does not obtain money that they are entitled to, the Council assists in preparation of a legal complaint, which is filed by the consumer with the Small Claims Court.
In April 2012, a ruling was issued in Small Claims File 51764-11-11, Marmazin v. Mega Lottery Ltd. In this case, the suit was prepared with the assistance of the Consumer Council, and was filed against Mega Lottery Ltd., for having continued to collect installment payments from the plaintiff, although the plaintiff had sent the required cancelation notice to the defendant.
The consumer, a Russian speaker, entered into the transaction after being approached by telephone in the Russian language. In the course of the call, she was persuaded to purchase a subscription to a club. The Court determined that the company had deceived the plaintiff as to the nature of the transaction, and had also exploited the fact that she lacked knowledge of the Hebrew language.
The Court canceled the transaction between the consumer and company; it also ordered the credit card company to cancel the outstanding charges against the customer’s account.
The Court ordered the defendant to pay the plaintiff the sum of 7000 NIS as exemplary damages, in addition to a refund in the sum of 2388 NIS and court costs of 500 NIS.
The high sum for damages ordered by the Court was, among other things, because of the fact that the consumer had not been provided with a disclosure statement listing details of the transaction, including details of her right to cancel the transaction.
• Do not give credit card details over the phone!
• Don’t be tempted by sales campaigns, or by statements like, “This special offer is only valid today!”
• If the transaction was carried out as a distance sale, you can change your mind and cancel it within 14 days from the date on which the transaction was made, or from the date you receive a disclosure statement with details of the transaction.
• If you have decided to cancel the transaction, you should send a cancelation notice, giving your reasons, by registered mail. Such a cancelation notice may also be sent by e-mail or by fax, but you should document the fact of sending the cancelation (make a note of the date and time, and the address or phone number to which the notice was sent).
If you want to consider the offer:
• It is recommended to refuse to carry out the transaction over the phone. Instead, ask for a copy of the contract, so as to read it carefully and consider the transaction.
• You should verify what the contract states in regard to payment terms.
• You should find out the conditions for canceling the transaction, and whether it can be canceled. Is there a commitment for a minimum period? And does cancelation involve payment of a penalty?
• If you decide to go ahead with the transaction, ensure that all of the promises given verbally are formalized in the contract.