By Mark Huffman
Sixteen states have reached agreement with Trilegiant Corporation and Chase Bank USA, settling a "negative option" fraud case in which the companies were charged with deceiving deceived consumers into paying for membership programs that offered supposed discounts on things like car and home repair, shopping, and other goods and services.
The companies will pay $14.5 million, $8 million of which will go for consumer restitution. The companies also must reform their marketing practices under the settlement.
"We alleged that Trilegiant mailed solicitations to consumers with small checks, typically for $2 to $10, that many consumers mistakenly thought were a rebate or some kind of reward," said Iowa Attorney General Tom Miller, one of the state officials bringing the case.
"But cashing the checks committed consumers to a 30-day 'trial offer' in some kind of membership program or buying club -- and then to monthly or annual charges if they didn't cancel."
The states' investigation found that Trilegiant had agreements with Chase Bank to gain access to Chase's customers and market the membership programs. Trilegiant used Chase's name in mailings, and Chase reviewed and approved marketing materials, the states alleged.
Trilegiant will pay $8.325 million for consumer restitution nationwide. Consumers will be eligible if they already have complained to Trilegiant or their state Attorney General, or if they file a complaint in the next nine months. Trilegiant and Chase also together will pay $6.1 million to the sixteen states.
Miller advised consumers to examine credit card and mortgage statements for any billing notices from Trilegiant Corporation of Norwalk, CT, and to watch for mail from Trilegiant that might include notices of memberships and how to cancel.
Consumers have been billed for annual membership fees ranging from $69.99 to $119.99, or monthly membership fees ranging from $6.99 to $9.99, depending on the particular program. If consumers didn't cancel the "free-trial-offer," fees were billed to credit card or loan statements.
Membership programs went by various names, including AutoVantage Gold Service, AutoVantage Service, Buyers Advantage Service, CompleteHome Service, Just for Me, Pet Privileges Service, Shoppers Advantage Service, and Travelers Advantage Service.
The Iowa Attorney General's Office said it has received around 79 complaints about the various solicitations since July 1, 2001, but far more Iowans may have complained directly to the companies -- or may not have noticed the unwanted billings at all. Complaints range from under $10 to over $800.
Unfortunately, the settlement only applies to consumers who reside in one of the 12 states that joined the suit. Those states are:
Residents of other states may wish to complain to their state attorney general and file a complaint with ConsumerAffairs.com, which works with class-action attorneys on behalf of consumers.
Consumers residing in those states who signed up for membership in a Trilegiant club through any bank or other company they did business with, and who were first charged membership fees on or after July 1, 2001, are eligible to receive restitution.
All consumers who have complained already will receive full restitution.
Trilegiant must send renewal notices to consumers who have active memberships, advising them that they have purchased the membership, and how to cancel the membership, if they wish.
If there are not enough funds to make full restitution to all consumers who complain, then consumers who complain over the next ninth months will get a pro-rata share. (Restitution is not limited to Chase Bank and Chase Home Finance customers, but applies to all consumers who paid money to Trilegiant for memberships.)
Consumers who are trying to find out if they unknowingly paid for a membership program should carefully examine their credit card or mortgage statements and also should monitor their mail for any notices from Trilegiant.
Consumers also can also contact Trilegiant electronically via Trilegiant's Internet website, www.trilegiant.com or by mail at:
Attention: K. Buonagurato
100 Connecticut Avenue
Norwalk, CT 06850
Tips for Avoding Scams
Miller provided this advice to consumers to avoid being charged unexpectedly for memberships in buying clubs and similar plans, and incurring ongoing charges:
• Be very wary of "free trial" offers that may result in charges if you dont cancel within the trial period.
• Be very wary of checks that accompany solicitations. Cashing them usually results in charges to consumers credit cards or checking accounts.
• If you do accept a "free trial" offer, watch carefully for the "confirmation" mailing that comes later and tells how the plan works and how you can cancel.
• Carefully review all credit card bills and mortgage statements each month to make sure all charges were authorized and expected. Consumers who find an unauthorized or unknown charge should call and write their credit card or mortgage company and challenge the charge.