After a year-long investigation into consumer complaints about surprise charges on credit card bills, the Senate Commerce Committee submitted legislation to Congress to outlaw online discount club schemes. The senate bill, called the Online Shoppers' Confidence Act, targets companies that team up with legitimate websites to trick consumers into buying discount club memberships they don't want.
The Act prohibits online vendors from transferring consumers' billing information, like credit card numbers, to discount clubs or other companies. Discount clubs must obtain billing information directly from the consumer.
Also, discount buying clubs must provide clear notice about the terms of their. membership offers. They must obtain the consumer's express consent to purchase a membership by requiring them to take positive action, such as click on an acceptance button.
If you've bought something online, anything from flowers to movie tickets, then you've probably seen the ads or promotions offering you a great deal - like money off your next purchase or a "free gift card." These too-good-to-be-true deals usually pop up as your checking out and paying for your purchase.
If you're not careful, one of these great offers may cost you a lot of money. The scam has led at least one state to take action. New York Attorney General Andrew Cuomo has launched an investigation of Webloyalty, Affinion, and Vertrue and several of the retailers or "partners" they do business with.
The scam is devilishly simple. After shopping online and finding exactly what you're looking for, you start the check-out process. This includes filling out your name, address, and, of course, your credit card number. As you complete the deal, it happens.
From out of nowhere, an offer "pops up" on your screen. In exchange for filling out a short rebate form or survey, you'll get a coupon or "store credit" for $10 off your next purchase from the retailer you just used. Or maybe it's a gift card. In any event, it's a tempting deal, and it's free, right?
No, not exactly. At least not most of the time. You see, online "discount clubs" or companies, such as Webloyalty, Affinion, and Vertrue, make deals with all kinds or online retailers. The retailers let the club "advertise" during the checkout process. If you take advantage of the club's "deal," the club gets access to your credit card and other personal information. The club then charges your credit card anywhere from $9 to $15 each month for "exclusive" deals and coupons offered by the club to its members.
For many consumers duped by the deal, they have no idea they're being charged by the discount club until (and unless) they carefully look at their credit card statements. By that time they may have been charged hundreds of dollars, or more.
Not New, Just Bigger
There have been reports and complaints about Webloyalty and its scam as far back as 2006. Since then, the scam has generated millions of dollars for the discount clubs - and millions of dollars of unwanted and unexpected debt for consumers. In 2006, Webloyalty claimed it made $86 million. By November 2009, Webloyalty, Affinion, and Vertrue made $1.4 billion, according to a federal investigation.
Today, close to 100 online retailers and web sites are part of the scam. Some of them you've known and trusted for years. For example, companies receiving millions of dollars from Webloyalty for being "partners" with that club and letting it use their sites to "enroll" "members" include:
What To Do
First, learn how to recognize the scam and avoid it. If you get an offer for a rebate, coupon, or something else while you're paying for an online purchase, carefully read the offer, including the fine print! You can discover almost immediately if the offer is legit or a scam by doing this.
Next, use a credit that offers fraud protection. This helps you get your money back if you're duped into taking the deal. If you're not sure if your credit card offers this, call the card company and find out. Be careful with debit cards, because some don't offer fraud protection. Don't use automatic withdrawals from your bank accounts. You don't want your banking information in the hands of scammers!
If you accidentally fall for the deal or aren't sure if you have:
- Check your credit card statements carefully. If you see charges for things you didn't intend to buy, call your credit card company immediately and request a refund and cancellation of any scheduled future charges
- Call the number of the retailer listed by the unauthorized credit charge. Demand a refund and ask to be unsubscribed from the club
- File a complaint with your state attorney general
Questions For Your Attorney
- What can I do if my credit card company won't refund charges made to my account by a discount club?
- How can I be sure a discount club has erased my personal information?
- Can membership in a discount club hurt my credit rating?