SB224 Alabama 2020 Session

Summary

Primary Sponsor

Cam Ward

Republican

Session

Regular Session 2020

Title

Consumer protection, deceptive trade practices, pyramid sales structure, further provided, Secs. 8-19-3, 8-19-5 am'd.

Summary

SB224 tightens Alabama law against pyramid schemes by banning selling rights to participate in pyramid structures unless a bona fide inventory repurchase program is used under specific rules.

What This Bill Does

The bill amends the deceptive trade practices law to make it unlawful to sell or offer to sell a right to participate in a pyramid promotional scheme. It creates a definition for a bona fide inventory repurchase program and sets terms for repurchasing inventory, including a 12-month window and a minimum 90% of the original net cost on commercially reasonable terms. It allows plans that base compensation on purchases if they do not involve inventory loading and include a bona fide inventory repurchase program, with required disclosures in recruiting materials and clear descriptions of excluded inventory.

Who It Affects

• Consumers who buy goods or services from sellers using these plans, who would be better protected from deceptive pyramid schemes and informed about repurchase options.
• Businesses and independent salespersons involved in direct-sales or pyramid-like plans, who must avoid pyramid schemes or implement a bona fide inventory repurchase program and disclose program details.

Key Provisions

• Defines a Bona Fide Inventory Repurchase Program and Commercially Reasonable Terms, including repurchasing current and marketable inventory within 12 months at not less than 90% of the original net cost.
• Defines Inventory, Inventory Loading, Pyramid Promotional Scheme, and related terms to support enforcement of the pyramid-scheme prohibition.
• Prohibits selling or offering to sell a right to participate in a pyramid promotional scheme, tightening the unlawful acts in the deceptive trade practices law.
• Provides a carve-out allowing plans that include a bona fide inventory repurchase program and do not involve inventory loading, subject to conditions.
• Requires the repurchase program to be clearly described in recruiting materials, disclose which inventory is not eligible for repurchase, and specify excluded inventory before repurchase.
• Keeps other existing unlawful acts under 8-19-5, reinforcing protections against deceptive practices associated with pyramid schemes and related marketing plans.

AI-generated summary using openai/gpt-5-nano on Feb 23, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Consumers and Consumer Protection