By Mark Huffman
November 17, 2009
After years of consumer complaints about unauthorized charges by abusive Internet marketers, the Senate Commerce Committee has sprung into action.
At a hearing this week, the committee issued a report, Aggressive Sales Tactics on the Internet and their Impact on American Consumers," accusing several firms of tricking consumers into signing up for worthless services that siphon money from their credit card or bank accounts each month.
"After six months, this Committee has found that the companies we are investigating have figured out very clever ways to manipulate consumers buying habits so they can make a quick buck, said committee chairman Jay Rockefeller (D-WV). "American consumers have been complaining for years about these misleading practices and asking for answers -- and rightly so."
Rockefeller and other committee members were responding to mounting consumer complaints, such as those received by ConsumerAffairs.com. Take this one from Tracy, of Vienna, West Virginia:
"Simple escapes authorized my credit card unknowingly for 189.95," she told ConsumerAffairs.com last month. "I have never even heard of this company. We had no membership number to even look up with them. They were using an address from 4 years ago. How did they get access to my credit card number?"
In nearly every case, these abusive practices stem from a relationship between two marketers. Tracy probably made a purchase using her credit card. Unknown to her, the company she was doing business with had a marketing agreement with a "third party" company, which was marketing a travel discount member service called Simple Escapes.
The agreement allows the third party firm to also market to Tracy, and if she agrees to do business with them, they can immediately access her credit card, getting her credit card information from their marketing partner. However, Tracy has no way of knowing that.
Buying something without realizing it
The company hawking Simple Escapes was required to present its offer to Tracy in a "clear and conspicuous" manner and get her consent before charging her credit card. But Tracy said she was completely unaware that any transaction was taking place. Tracy, in effect, bought something without realizing it.
"Millions of Americans are getting hit with these mystery charges every month -- we have to do all we can to protect the hard working families relying on us to look out for their wallets and well-being," Rockefeller said.
Committee investigators singled out three firms as among the worst offenders. The committee said Vertrue -- which at one time operated Simple Escapes --, Affinion, and Webloyalty "exploit consumers' expectations about online shopping to trick them into joining their membership clubs.
Affinion, Vertrue, Webloyalty, and their e-commerce partners have earned over $1.4 billion in revenue with their misleading tactics, the committee report said. There have been more than 30 million consumer enrollments in these clubs and several million people are unknowingly enrolled in these clubs at any one time.
More than 450 e-commerce websites and retailers have partnered with Affinion, Vertrue, and Webloyalty to employ aggressive sales tactics against their online customers splitting the revenue about 50-50, according to investigators. Eighty-eight companies have made more than $1 million by partnering with Affinion, Vertrue, and Webloyalty, including Classmates.com, which made more than $70 million.
And what of the "benefits" consumers are supposed to reap by being members of these discount programs? The committee found that almost no one receives the "cash back award" that Affinion, Vertrue, and Webloyalty offer to online customers at the time of enrollment.