States Taking On Unauthorized Charges For 'Memberships'

For years, consumers have complained of finding charges on their credit cards for memberships in buying clubs and discount programs they had never heard of.

The charges stem from negative option marketing campaigns which enrolled the consumers after they had made an online purchase with their credit cards. Now, states appear to be turning their attention to the companies that market these products.

In New York, Attorney General Eric Schneiderman has announced a settlement with Vertrue Incorporated and its subsidiary, Adaptive Marketing, LLC to provide $2 million in refunds to New York consumers who say they were tricked into enrolling in these discount clubs.

Tricked into signing up

“This scheme tricked thousands of New York consumers into unknowingly signing up for memberships programs they did not want or need,” Schneiderman said. "The discount-club seller Adaptive profited by luring consumers with enticing but deceptive offers that included hidden membership fees. This settlement helps make the Internet a safer place for consumers to shop."

Schneiderman says his investigation found that Adaptive entered into arrangements with many well known retail companies, such as Classmates, Intelius and VistaPrint, that permitted Adaptive to solicit the companies' customers by offering discounts, rebates, or other incentive offers while the customer was shopping online.

When a consumer accepted what he or she thought was the retailer's online offer, the consumer was unknowingly transferred to an Adaptive webpage and automatically enrolled in Adaptive's fee-based membership program. Because Adaptive obtained a consumer's credit or debit card account information from the retail partner, consumers were not required to re-enter their credit and debit card numbers and were unaware that they were being enrolled in Adaptive's fee-based membership program.

Iowa secures refunds

New York isn't the only state taking action in this arena. Iowa Attorney General Tom Miller says refund checks totaling about $700,000 are going out to approximately 2,800 Iowa consumers who had been unlawfully charged for memberships by AmeriMark Direct, LLC of Cleveland, Ohio, another marketer is discount club memberships.

The refund checks are part of a settlement agreement from last May, called an Assurance of Voluntary Compliance, which required AmeriMark to make payments into a fund to provide partial refunds to Iowans.

AmeriMark has sent all required payments, and the Consumer Protection Division is now mailing refund checks to eligible Iowa consumers. The refund checks range in amount from $63 to $1,780, according to Miller.

The Consumer Protection Division investigated AmeriMark after receiving a complaint in September 2010 from an Iowan who discovered that her credit card had been charged more than $1,500 over a four year period for a membership she didn’t know she had.

Both Miller and Scheiderman advise consumers in their states to be very wary of "trial offers," or "free offers." That's how consumers usually get enrolled in these memberships.