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Vertrue Trial Opens in Iowa

Company allegedly signed customers up for service without permission

By Jon Hood
ConsumerAffairs.com

October 28, 2009

Iowa Attorney General Tom Miller filed the suit in May 2006, after a survey revealed that, of around 400 Vertrue members questioned, precisely zero were satisfied with the company’s services.

Connecticut-based Vertrue, which also answers to the aliases MemberWorks and MWI, provides a number of “membership” programs that offer supposed discounts on items ranging from restaurants to jewelry to home improvement products.

Miller says Vertrue went to great lengths to trick consumers into signing up for the service. Many consumers were inadvertently enrolled when they made a routine call, such as one to their own credit card company or to place an order over the phone. Toward the end of the call, the consumer was offered a “risk-free membership,” usually on a trial basis. According to Miller, any consumer who then failed to affirmatively cancel the membership became subject to monthly fees taken directly from their bank account or credit line.

Many consumers didn’t notice the charges because they often were listed next to an innocuous-looking name on statements. Debits were often charged to either “MWI” or “ap9,” followed by one of the “club” names – HomeWorks, Simple Escapes, Connections, Essentials, or Leisure Advantage. Thus, a typical debit might be to “MWI HomeWorks,” a name that won’t catch the hurried consumer’s eye, especially when the charge is for a relatively small amount of money.

Worse, Miller said that consumers never actually gave their credit card numbers to the company; account information was instead obtained from the business that the consumer called in the first place. Vertrue’s well thought-out scheme ensured that, as Miller put it, “busy consumers too often pay [the charges] without realizing it.”

Pamela Douglas testified that she was enrolled in three separate memberships in 1999, which she attributed to “very aggressive” tactics by a telemarketer. In 2008 – a full nine years later – Douglas received a letter from “ValuMax” informing her of her longstanding membership. She then noticed that yearly charges on her credit card had gone from $59.95 in 1999 to $239.95 in 2008. Douglas complained to Miller’s office, and Vertrue refunded her money.

The case is being heard by Polk County District Court Judge Robert Hutchison instead of a jury. Earlier this week, Hutchison ruled that he would close the courtroom for parts of the trial in order to protect Vertrue’s trade secrets. Hutchison said he hopes to keep the courtroom open as much as possible, but that it might have to be sealed when “examining a particular witness.” The company claims that revelation of consumer data could hurt its supposed competitive advantage. Hutchison promised to close the courtroom whenever there is testimony concerning exact company data.

Protection of trade secrets has long been accepted by American courts as a worthwhile goal. The vast majority of states have adopted the Uniform Trade Secrets Act, which imposes civil liability on anyone who misappropriates formulas or techniques that contribute to a company’s success. Companies often further protect such secrets by asking employees to sign non-disclosure agreements.

ConsumerAffairs.com has received its fair share of Vertrue complaints. Alexander of New Brighton, MN writes: "I have unauthorized credit card charges from Vertrue companies: Health Trends, Simply Yours, Pharmacy Gold, and Dealmax. I cannot reach Health Trends to cancel. I will have to cancel the credit card."

Terry of Indianapolis, IN offers a representative complaint: "Their AP9 companies have taken 537.30 out of my checking account without my approval, even after I have talked with them about it. I want them to stop removing money from my account and give all my money back in full."

Miller’s suit charges Vertrue with violations of the Buying Club Memberships Law, an Iowa statute that requires certain important commitments to be memorialized in writing, and mandates that corporations notify consumers of their right to cancel. Miller’s office says that as many as 500,000 residents of Iowa alone have been enrolled in the service.

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