The state of New York has secured $10 million in settlements with companies that tricked hundreds of thousands of consumers into signing up for discount clubs that charged hidden fees.

The marketing firm Affinion Group, Inc. and its subsidiary Trilegiant (together "Affinion/Trilegiant") will establish a $5 million fund to provide restitution to defrauded consumers and will pay an additional $3 million in penalties and fees, according to Attorney General Andrew M. Cuomo. Affinion/Trilegiant also must end the deceptive practice of enrolling New York consumers in programs via solicitations in the form of mailed checks.

Separately, the Cuomo obtained settlements with five retailers to reform their marketing arrangements with discount clubs. The retailers will collectively pay over $2 million for consumer refunds, education, costs and fees.

In the fine print

These settlements are part of a wide-ranging investigation into the discount club industry. The probe found that when consumers completed online purchases from familiar retailers, they were often presented with a cash-back or discount offer from a marketer like Affinion/Trilegiant. Information about accepting the offer and its ramifications -- including the fact that the consumer was agreeing to transfer his or her credit or debit card account information -- was buried in fine print and cluttered text. Since consumers were not required to provide their financial information as part of the enrollment process, they often accepted the offer without knowing they were joining a fee-based program.

Affinion/Trilegiant and other marketing companies also carried out this scheme via mailed check solicitations. The companies would mail checks to consumers that looked like rebates or rewards from known retailers. If the checks were cashed, the consumer would be signed up for a fee-based program.

Once enrolled in a discount club, recurring charges begin to appear on consumers' credit or debit card bills from unfamiliar companies. Often due to their low dollar amount or the non-specific club names on consumers' account statements, the charges often went unnoticed.

Judging from the complaints ConsumerAffairs.com has received, New Yorkers aren't the only consumers who have been bit.

Karen of Walnut Creek, CA, a Wells Fargo customer says she discovered 28 consecutive unauthorized credit/debit card charges of 12.99 per month for "Identity Theft Protection". "When I called Wells Fargo," she writes, "I was told the charges would had to have been authorized but if I wanted to research it I needed to call." Karen says she called the number given and was told to FAX her complaint, which she did. "After doing Internet research on the name Trigeliant, the fax number and the phone numbers, I fear there may be no resolve."

"I was enrolled in Trilegiant's Great Fun after signing up with truecredit.com to receive my credit report," Aimee of Minneapolis, MN, tells ConsumerAffairs.com. "I called Trilegiant to complain and cancel; the representative said that she would send me a refund check, but that I cannot cancel until I cash it. She assured me that the check would arrive shortly. Two more monthly subscription fees were posted to my credit card before I finally received this 'refund.' The refund was no refund at all; it was a check that, if I cashed it, would enroll me in another of Trilegiant's clubs: Health Saver."

"This is a case of consumers who think they are getting a deal when in fact they are being tricked into signing up for a service that bills them every month without their knowledge," said Cuomo. "As our investigation continues, consumers should be on the lookout for cash-back and other discount offers that suddenly appear online or in the form of a check - they are often too good to be true. Affinion/Trilegiant did the right thing by cooperating with my office to end its deceptive practices and I urge other companies involved in this industry to follow their lead."

Settlement terms

According to the settlement, Affinion/Trilegiant must:

• Fully refund fees charged to consumers who unknowingly enrolled in or authorized billing for Affinion/Trilegiant discount clubs and programs

• Permanently end its practice of marketing discount clubs and programs by mailing checks to New Yorkers

• Permanently end its practice of obtaining consumers' billing information from online partner retailers

• Reform its online marketing practices to ensure consumers understand they are enrolling in a program offered by Affinion/Trilegiant for which they will be billed

• Make redemption forms for rebates immediately available to consumers online

Discount clubs generate at least a billion dollars each year, much of which is amassed through fraud, and retailers get millions of dollars in revenue for passing customers' credit card information to the programs. Affinion/Trilegiant is one of the largest companies active in marketing fee-based discount clubs and protection benefit programs. Affinion/Trilegiant's marketing has involved arrangements with well-known retailers such as Classmates Online, Inc., 1-800 Flowers.com, and Budget.

Retailers settle

In addition to the settlement with Affinion/Trilegiant, the Cuomo announced settlements with several retailers that have partnered with either Affinion/Trilegiant or a similar marketing company, such as Webloyalty and Vertrue, which are also under investigation by his office.

According to these settlements, the retailers will reform their marketing practices, permanently end any mailed check solicitations, permanently end the practice of providing consumers' billing information to companies that market discount clubs online, and collectively contribute more than $2 million to a fund that will pay for consumer education, refunds, and the costs of the investigation.

The retailer settlements and amounts are as follows:

• Classmates Online, Inc.: $960,000

• FTD, Inc.: $640,000.

• Budget: $207,000

• GameStop: $195,000

• Avon: $68,000

The attorney general's office has received hundreds of complaints from consumers who have incurred unauthorized charges from companies that market discount clubs. These programs may offer actual discounts and other protection benefits, but consumers are often unaware that they are even enrolled in the programs. This investigation is continuing.

Consumer actions

Any consumers who find unauthorized charges on their account statements should call the number listed on the statement and demand a full refund. Most consumers who are enrolled in Affinion/Trilegiant's programs will be receiving notice of the settlement and claim forms over the next 30 days.

Charges for Affinion/Trilegiant programs may appear on consumers' credit or debit card account statements as "TLG," followed by the name of one of the following programs: AutoVantage; Buyers Advantange; CompleteHome; Everyday Privileges; Everyday Values; Great Fun; Great Options; Healthsaver; Hotline; IDSecure; Just For Me; Privacy Guard; Shoppers Advantage; and Travelers Advantage.

Consumers who discover unauthorized charges from companies that market discount clubs other than Affinion/Trilegiant, such as Webloyalty, Inc. (whose charges may appear on their account statement as "WLI" followed by the name of the discount program) or Vertrue (whose charges may appear on account statement as "AP9," "MVQ," or the name of the discount program) should cancel their membership with the program and/or request a refund.

Consumers should:

• review their credit and debit account statements carefully each month to ensure that all charges have been authorized;

• carefully read the fine print provided with any discount or service offers, especially when shopping online.

• not cash unsolicited checks that come in the mail without carefully reading any fine print that appears on the front or back of the check, as well as any materials that accompany the check.