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California Sues Chase, Trilegiant

July 12, 2005
California Attorney General Bill Lockyer has filed a lawsuit against Chase Bank and Trilegiant Corp. alleging the defendants unlawfully deceived tens of thousands of California consumers into paying for membership programs that purportedly provided discounts on car and home repair, shopping, and other goods and services.

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"In colluding to perpetrate this unsavory scheme, Chase and Trilegiant preyed on vulnerable senior citizens and consumers who read and speak limited English," said Lockyer. "After tricking victims into joining these membership programs, the defendants used deceptive billing practices to maintain their ill-gotten income stream. We're filing this lawsuit to make the victims whole and obtain penalties to hold the companies accountable."

Earlier this year, Trilegiant paid the state of Florida $400,000 in restitution and agreed to provide compensation to consumers wronged by the company's tactics in marketing various club memberships. The company marketed the memberships to Florida consumers in a variety of manners, none of which was ever clearly disclosed, prosecutors said. Some 40 such clubs were marketed, including Buyer's Advantage, Traveler's Advantage and Complete Home.

Filed in San Diego County Superior Court, Lockyer's complaint alleges Chase, Trilegiant and other defendants violated California laws that prohibit false or deceptive advertising and unfair business practices. The number of California victims is not specified in the complaint, but Lockyer's office said the total reached into the tens of thousands.

The complaint seeks restitution for victims, civil penalties of $2,500 per unlawful act, an additional $2,500 penalty for each violation that victimized seniors, and an order permanently barring the defendants from engaging in the alleged practices.

Cendant Corp. in January 2004 changed the name of one of its subsidiaries to Trilegiant Corp., according to the complaint. The subsidiary, the complaint alleges, continued the membership scheme under that name. Cendant, which had an ownership stake in Trilegiant Corp. prior to January 2004, is not named as a defendant in the lawsuit.

The complaint alleges Chase and Trilegiant enter agreements under which Trilegiant gains access to Chase's customers for the purpose of marketing the membership programs. In soliciting Chase customers, Trilegiant uses Chase's name, and Chase reviews and approves marketing materials used by Trilegiant, according to the complaint. On occasion, the complaint alleges, Chase includes the solicitations in its customers' monthly statements.

"Chase receives substantial compensation for its participation in this marketing scheme, including commissions on initial sales and automatic renewals of Trilegiant's products and services to Chase customers," according to the complaint.

The defendants' solicitations offer consumers "free" trial memberships in discount purchasing programs, the complaint alleges, without adequately informing consumers they will be billed automatically for a one-year membership if they do not affirmatively cancel with a specified period time. Typically, the cancellation period is 30 days.

The solicitations include checks that consumers are urged to cash as a "reward for being a valued Chase customer," the complaint alleges. The defendants do not adequately disclose to consumers that if they cash the checks, they automatically become members in the discount buying program, and will be billed for a one-year membership if they do not cancel by the specified deadline, according to the complaint.

"Consumers are unaware that Chase allows Trilegiant to charge fees to consumers' Chase bank accounts or add the fees to their Chase monthly mortgage statements, merely upon the consumer cashing a ‘reward' check or accepting a ‘free' trial offer," the complaint alleges.

The annual membership fee ranges from $69.99 to $119.88, the complaint alleges. The defendants fail to adequately disclose the membership will be renewed every year unless the consumer affirmatively cancels, according to the complaint.

However, the defendants' deceptive billing practices make it difficult for consumers to know they are members, or are paying for a membership. "Consumers do not realize they have been billed for such membership services because the membership fees are sometimes described as ‘Optional Products' or described in a manner that does not clearly identify the particular membership program, seller or nature of the charge," the complaint alleges.

The alleged scheme has hit hardest some of the most vulnerable consumers, according to the complaint. "Through this marketing scheme, (the) defendants prey on consumers, many of whom are unsophisticated, elderly or do not read or speak English as a first language," the complaint alleges.

The membership programs offer purported discounts on a variety of goods and services, including car maintenance, home repair, car rentals, travel services, shopping and pet products, according to the complaint.

The programs are marketed under the following names: AutoVantage, AutoVantage Gold, Travelers Advantage, Complete Home, Shoppers Advantage, Buyers Advantage, Pet Privileges and Just for Me.

California consumers who believe they have been victimized by the scheme alleged in the lawsuit, or similar membership programs, should contact the Attorney General's Office at www.ag.ca.gov/consumers/mailform.htm or by writing to the Public Inquiry Unit of the Attorney General's Office at P.O. Box 944255, Sacramento, CA 94244-2550.

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