Discount club marketer Webloyalty.com, Inc.will refund defrauded consumers who were charged unauthorized fees and will also pay $5.2 million in penalties, costs, and fees to the state of New York, a total settlement worth $8.5 million.
The company is just the latest to make amends for charging consumers' credit cards without proper consent. Separately, Attorney General Andrew Cuomo obtained settlements with five retailers who have partnered with Webloyalty: Ticketmaster LLC; Pizza Hut, Inc.; Orbitz Worldwide, LLC; Shutterfly, Inc.; and MovieTickets, Inc.
The settlements require the retailers to collectively pay over $3.3 million for consumer refunds, education, and fees, and require that they reform their marketing arrangements with discount club sellers.
Cuomo's investigation into the discount club industry 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 Webloyalty. 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.
'Buying' without knowing it
Once enrolled in a discount club, recurring charges begin to appear on consumers credit or debit card from unfamiliar companies. Due to their low dollar amount or the non-specific club names on consumers account statements, the charges often go unnoticed.
In this all too common Internet scheme, consumers were tricked into paying for monthly services for a discount club while shopping online at trusted retailers, Cuomo said.
According to the settlement, Webloyalty must:
• Fully refund fees charged to certain consumers who unknowingly enrolled in or did not authorize billing for Webloyalty discount clubs and programs
• 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 Webloyalty for which they will be billed
• Make redemption forms for rebates immediately available to consumers online
Last month, Cuomo obtained more than $10 million in settlements with Affinion Group, Inc., its subsidiary Trilegiant, and other retailers engaged in discount club schemes.
Discount clubs generate billions of dollars each year, much of which has been amassed through fraud, and retailers have obtained millions of dollars in revenue for passing customers credit card information to the programs.