New York Attorney General Andrew Cuomo Wednesday announced that his office is launching an investigation into 22 online retailers, which gave out consumer credit card information to three marketing companies engaged in deceptive online marketing practices. The three companies, Affinion, Vertrue, and Webloyalty, have been under a U.S. Senate investigation since May of last year following numerous consumer complaints about charges to their credit cards bordering on fraud.
According to a report released last November by the U.S. Senate Committee on Commerce, Science and Transportation, the three marketing companies tricked consumers into enrolling in web “discount clubs,” while ordering flowers or movie tickets online, or during the check-out process at well-known and trusted online retailers, including Barnes & Noble, Priceline.com, Travelocity, and Pizza Hut. According to the Senate report, as much as $1.4 billion in unauthorized charges have been charged to consumers credit cards over the past decade as a result of the marketing schemes.
An estimated 75 percent of shoppers signing up for the clubs had no idea they had enrolled in a web “discount” club, until unauthorized charges began to show up on their credit cards. Consumers were lured in by promises of $10-15 rebates, and never suspected a ruse, because they never had to give out their credit card information. That was supplied to the three marketing companies by the online retailers the consumers were shopping with, in exchange for lucrative fees.
This is what the New York attorney general wants to put an end to. His office has sent out investigative subpoenas to 22 online retailers involved in dealings with Affinion, Vertrue, and Webloyalty. On Wednesday, Cuomo further warned Internet retailers to refrain from channeling their customers into the marketing schemes, and to stop sharing customer credit card information with the companies.
“This online scheme has impacted the finances and tried the patience of tens of millions of consumers nationwide,” says Attorney General Cuomo in a press release issued by his office. “Well-known companies are tricking customers into accepting offers from third party vendors, which then siphon money from consumers’ accounts.”
The subpoenas sent out to the 22 online merchants ask the retailers to provide information about their practice of sharing consumers’ credit card information with the three post-transaction marketing companies. They further request that the online retailers provide details about how much they knew about the deceptive solicitations as well as how much they have received in compensation in return for sharing consumers’ account details. The merchants subpoenaed include: Barnes & Noble, Orbitz.com, Buy.com, Ticketmaster.com, MovieTickets.com, FTD.com, Shutterfly.com, 1-800Flowers.com, Avon.com, Budget, Staples.com, Priceline.com, GMAC Mortgage, Classmates.com, Travelocity, Vistaprint, Intelius, Hotwire.com, Expedia/Hotels.com, Columbia House, Pizza Hut and Gamestop/EB Games.
The New York Attorney General’s Office is taking action following numerous complaints from New Yorkers whose credit cards were charged after they were unknowingly enrolled in one of the discount clubs. The three post-transaction marketing companies, according to consumer complaints, also made it very difficult to opt out of the bogus membership programs.
Several retailers have vowed to stop working with Webloyalty, Affinion and Vertrue, including movie ticket seller Fandango, Vistaprint, Priceline, Expedia and 1-800-Flowers.com. Fandango has vowed to pay $400,000 in restitution to its customers, according to the Attorney General’s Office.
After the U.S. Senate committee report cast light on the deceptive marketing practices in November, the three companies have started requiring customers to re-enter their credit card number when signing up for the service, reports Business Week.