The Subscription Trap

No Strangers to Courtrooms

Rockefeller isn't the only politician to have gone after Affinion, Vertrue, and Webloyalty. Affinion has been sued by the attorneys general of 16 states acting in concert, and by the attorney general of Florida (PDF) separately. In 2008, the company paid $25 million to settle a nationwide class-action lawsuit for allegedly billing and collecting unauthorized charges from consumers for products or memberships that consumers never requested or consented to receive. (Some of those incidents dated back to years before 2005, when Affinion was known as Trilegiant.)

Webloyalty is currently under investigation by the attorney general of Connecticut. In 2009, Webloyalty agreed to settle a class-action lawsuit in which plaintiffs alleged that the company had defrauded them. As part of the settlement Webloyalty agreed to adopt a number of changes to the way it markets its loyalty programs, as well as to pay $10 million to consumers who had inadvertently signed up for its membership clubs.

Over the past nine years, Vertrue, which changed its name from MemberWorks in October 2004, has been sued by the attorneys general of California, Florida, and Iowa. Each suit involved similar allegations that the company had deliberately misled customers or charged them without their knowledge.

In January, New York attorney general Andrew Cuomo issued subpoenas to 22 e-commerce retailers--Avon.com, Barnes & Noble, Budget, Buy.com, Classmates.com, Columbia House, Expedia/Hotels.com, FTD.com, Gamestop/EB Games, GMAC Mortgage, Hotwire.com, Intelius, MovieTickets.com, 1-800Flowers.com, Orbitz.com, Pizza Hut, Priceline.com, Shutterfly.com, Staples.com, Ticketmaster.com, Travelocity, and Vistaprint--seeking information on their dealings with Affinion, Vertrue, and Webloyalty. Cuomo says that these "well-known companies are tricking customers into accepting offers from third-party vendors, which then siphon money from consumers' accounts."

Who Has Your Back?

Then: In the past, enrolling in a third-party discount club (like Shopper Discounts & Rewards) from a shopping site (like NetZero) was a simple matter of entering and verifying your e-mail address. Many incautious enrollees thought that they were doing nothing more than claiming a cash-back award from the shopping site.
Some people, including Senate investigators, believe that the government shouldn't be the only entity looking out for consumers' interests in these cases. They think that credit card companies American Express, MasterCard, and Visa should do a better job of policing posttransaction marketing.

Now: Faced with federal scrutiny, posttransaction marketers have altered their sign-up process to make joining a third-party club (like Reservation Rewards) from a shopping site (like MovieTickets.com) require more effort on the consumer's part.
The argument goes like this: The credit card companies undoubtedly receive many requests from customers to reverse charges from Affinion, Vertrue, Webloyalty, and similar companies. (Each company declined to discuss how many times they have received chargeback requests from customers disputing a charge from them.) Credit card companies have rules for dealing with merchants whose customers frequently ask to have their charges reversed. Offending merchants are subject to fines or even removal from a credit card's network.

In the wake of the Senate Commerce Committee's initial report, American Express spokesperson Lisa Anselmo says that her company is scrutinizing the way Websites pass credit card information to Affinion, Vertrue, and Webloyalty. "We share the committee's concern and are investigating alleged unfair and deceptive practices," Anselmo said. "A merchant can't just transfer information to a third party."

MasterCard declined a request for an interview, instead releasing this statement: "We are investigating online marketing practices by certain merchants. As part of this investigation, we have notified the banks that provide acceptance services for these merchants that they must take action against merchants violating MasterCard rules."

Visa officials refused to comment specifically about Affinion, Vertrue, and Webloyalty, beyond saying that the company is cooperating with the Senate Commerce Committee's investigation. A Visa spokesperson says that the company has a zero tolerance for fraud. If consumers feel that they were tricked into a charge, they should request a chargeback and Visa will investigate, the spokesperson said.

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