Credit card companies have numerous rules in place to protect cardholders from authorized charges. Yet, in the case of a credit card scam currently under investigation by Congress, Visa, MasterCard, and American Express may have adapted the code of conduct of the three wise monkeys: see no evil, hear no evil, speak no evil.
The case involves $1.4 billion in shady credit card charges to as many as 30 million cardholders by the so-called post-transaction marketing companies Webloyalty, Vertrue, and Affinion. The U.S. Senate Committee on Commerce, Science, and Transportation has been probing the case since May, following complaints from thousands of online shoppers. According to the government report, the three companies tricked consumers to sign up for bogus club membership programs during the online check-out process at major websites, which the shopper inherently trusted. Then, without consumers’ knowledge or consent, monthly membership charges began to appear on their credit cards, even though they had never given out their credit card information to the marketing firms involved.
How then did the three marketing companies gain access to consumers’ private credit card information? The good, old-fashioned way: by paying money to an intermediary, in this case the online merchants with which the consumer was shopping. Reportedly, 88 large online retailers, including Barnes & Noble, Priceline, Travelocity, Orbitz, Buy.com, and more received nearly $800 million in fees in exchange for the information.
According to the report from the Senate Committee investigation, the marketing material was intentionally designed to mislead shoppers by luring them in with offers of a cash rebate and obfuscating the real terms of the program. Because they never gave out their credit card information, most shoppers never realized that they were signing up for a program.
While the online merchants clearly are to blame for selling customer credit card information to the marketing firms, the Senate Commerce Committee is turning the spotlight to the three major credit card companies as well. Lawmakers want to know how consumers could be charged $1.4 billion for something they never purchased, and why Visa, MasterCard, and American Express never took steps to curb these practices.
By their own rules, credit card companies require the cardholders, and not an intermediary, to give out the information necessary to complete a charge. In addition, credit card companies keep tabs on consumer complaints, and have practices in place to ban merchants who get too many complaints and credit card chargeback requests.
Plenty of outraged consumers contacted American Express or the banks issuing Visa and MasterCard to challenge the charges and request a refund. So, Congress wants to know, how could the shady practices of Webloyalty, Affinion, and Vertrue go on for years, despite the large number of consumer complaints?
Commerce Committee Chairman Jay Rockefeller (D-W.V.) has asked the three credit card companies to come up with detailed information about the number of credit card transactions processed for Affinion, Vertrue and Webloyalty over the past five years.
“It concerns me greatly that the companies we are investigating have been able to acquire the credit and debit card numbers of millions of American consumers and bill them every month for services the consumers do not realize they have purchased,” Rockefeller wrote in a letter to American Express Chairman and CEO Ken Chenault. “Because American Express processes millions of payments generated through these misleading sales practices, I request that you provide information response to [these] questions.”
In addition to information about the credit card transactions processed for the three marketing companies, Rockefeller also asked for detailed documentation of the credit card companies’ chargeback monitoring programs in general, and their chargeback records for the three deceptive marketing firms in particular. The companies are required to provide the information by December 22. The Senate committee plans to hold another hearing about the matter early next year.
