Major e-sellers Have Made Millions Scamming Customers

Posted 11/18/2009 at 1:06pm | by Bart Salisbury

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Stuff like this is why we’re told to always be wary. Not just of strangers, it appears, but of friends as well. The Senate Committee on Commerce, Science and Transportation held a hearing on Tuesday, where it laid out the ‘questionable’ marketing practices of Vertrue, Webloyalty, and Affinion, web merchants that sign up users to “web loyalty programs,” to the tune of $9 to $12 a month, without the user being aware. How? By riding on the coattails of respected e-retailers such as Orbitz, Buy.com, Fandango, and Continental Airlines.

How’s the alleged scam work? At the end of a transaction at a legitimate web site a pop-up appears asking the user to enter an email address if they are interested in receiving cash back or a coupon. Simple enough, except buried in the fine print is enrollment in the web loyalty program, along with permission to charge the user’s credit card a monthly fee. Where’s the credit card information come from? The legitimate web site sells that information to the loyalty program. The user never knows about the transaction until a charge appears on their credit card statement. The user gets double-pwn3d: by the unscrupulous web loyalty program, and by a trusted merchant.

Overall, the Senate Committee estimates the three loyalty programs generated more than $1.4 billion from the scheme, with $792 million kicked back to the web retailers who provided the user’s credit card information. (Classmates.com, for example, raked in $70 million.)

It would be easy to lay the blame at the users feet: you really should read the fine print. (Although the vast majority of us never do.) But the Senate Committee reported that managers at Affinion, Vertrue and Webloyalty knew full well that people were completely unaware of what they were signing up for, and that their programs were specifically designed to mislead people. The ‘legitimate’ retailers who enabled this were also aware of what was going on, but turned a blind-eye because of the revenue it generated.

Webloyalty and Vertrue stated during the hearing they’ve changed their business practice, and now require additional information for enrollment. Others aren’t convinced, arguing that the only way to curb the practice is to make it illegal for retailers to sell customer’s personal information.

Image Credit: trochim/Flickr