The New York Attorney General’s office is investigating 22 popular online retailers that “deceptively” link consumers to fee-based membership programs labeled as discount offers, the state’s attorney General, Andrew M. Cuomo, announced today.
Already, Cuomo’s office said it has reached an agreement with the online movie ticket retailer Fandango to end such a practice.
As a result of the ongoing practice of linking to third-party vendors and sharing account information, ”small and recurring charges” begin to appear on consumers’ credit or debit card bills from unfamiliar companies, the New York A.G.’s office said. And because of the low amounts billed, a card holder may not notice for months.
“Well-known companies are tricking customers into accepting offers from third party vendors, which then siphon money from consumers’ accounts,” said Attorney General Cuomo. “I commend Fandango for doing the right thing by ending the practice of sharing consumers’ financial information with these discount club sellers. I expect the other businesses to follow Fandango’s lead and adopt these reforms to protect consumers who shop online.”
Cuomo has sent subpoenas to 22 prominent retailers that have deals with the three major companies that offer these discount programs: Webloyalty, Affinion/Trilegiant and Vertrue. The three companies under investigation bring in revenues of more than $1 billion per year, much of which is amassed through fraud, Cuomo said.
The merchants being investigated include: Barnes & Noble, Orbitz.com, Buy.com, Ticketmaster.com, MovieTickets.com, FTD.com, Shutterfly.com, 1-800Flowers.com, Avon.com, Budget, Staples.com, Priceline.com, GMAC Mortgage, Classmates.com, Travelocity, Vistaprint, Intelius, Hotwire.com, Expedia/Hotels.com, Columbia House, Pizza Hut and Gamestop/EB Games.
Here’s how the practice works, according to Cuomo’s office:
- When consumers shop online from familiar retailers, they are often presented with a discount or cash-back incentive offer as they complete their purchase.
- After clicking on the discount or incentive banner, the users are “unknowingly directed to a membership program seller’s web page” that is not part of the online retailer’s site.
- The consumer is then instructed to accept the discount or incentive.
- Information about joining the membership program and its ramifications, “including the fact that the consumer is agreeing to transfer his or her credit or debit card account information,” is buried in fine print and “cluttered text.”
According to Cuomo’s office: “Membership program companies enter into highly lucrative deals with the retailers and banks, which bring in millions of dollars in revenue when their customers click on deceptive incentives or become unknowingly enrolled.”
