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Forum Administrator User ID: 790439 United States 11/17/2009 05:22 PM Report Abusive Post Report Copyright Violation | Three companies have generated more than $1.4 billion by "misleading" Web shoppers into signing up for so-called loyalty program memberships, according to a Senate report (PDF) issued Tuesday. Ray France, a U.S. Army veteran testifies at a Senate hearing about how consumers are duped into paying monthly fees to join online loyalty programs. (Credit: U.S. Senate Commerce committee) Out of that money, the report charges, Webloyalty, Vertrue, and Affinion paid online retailers $792 million, and in exchange the retailers handed over access to their customers' credit cards. The U.S. Senate Committee on Commerce, Science and Transportation has spent six months investigating complaints from people who found mysterious charges on their credit card bill and don't know where they came from. "Affinion, Vertrue, and Webloyalty use aggressive sales tactics intentionally designed to mislead online shoppers," the Senate Commerce committee wrote. "These three companies exploit shoppers' expectations about the online purchasing process to charge millions of consumers each year for services the consumers do not want and do not understand they have purchased." The government says the investigation shows that Webloyalty, Affinion and Vertrue dupe consumers into entering their e-mail address just before they complete purchases at sites such as Orbitz, Priceline.com, Buy.com, 1-800 Flowers, Continental Airlines, Fandango, and Classmates.com. "When we agree to buy something from retailers we expect a merchant to protect our credit card and other information...what's happening is many online merchants have decided to betray their customers' trust." --Sen. John Rockefeller Unsuspecting shoppers enters the address thinking they will receive some kind of cash-back offer or coupon, but are instead unwittingly agreeing to allow the retailer to release their credit card information to the loyalty programs. The way the government lays out its findings, it appears the loyalty programs are playing on the reluctance of many consumers to read fine print, check their credit card statements carefully, and the blind trust many have in stores where they shop. Vertrue and Webloyalty said that they have changed their practices and have opted to require consumers to key in some credit card or other information to enroll into one of the company's membership programs. Government regulators say that this doesn't go nearly far enough. Affinion representatives were not immediately available for interview. The government's report provides a jaw-dropping amount of information that shows: • Managers at Webloyalty, Affinion, and Vertrue are fully aware that most of the people signing up for memberships are unaware that they doing it. • Their programs are designed to mislead consumers into signing up. "Classmates.com, which has been partnered with each company at different times and has earned more than any other partner, generated approximately $70 million in revenue." --From the Senate report • Retailers doing business with the companies are also aware that customers are likely to be angered once they notice the charges but do it because they are paid big bucks. Classmates.com has pocketed $70 million from partnering with the all three companies, according to the report. The government says that 88 retailers have made more than $1 million through the partnerships with e-loyalty programs, while 19 have made more than $10 million. "The more aggressively an e-commerce company is willing to market Affinion, Vertrue, or Webloyalty's membership clubs to its customers, the more money it will earn," the Senate Commerce committee wrote in the report. Another reason e-tailers risk alienating customers is that some of the e-loyalty companies insulate the Web stores from customer complaints. They call these complaints "customer noise." To illustrate this, the Senate committee included excerpts from a letter from a Priceline shopper who said she was charged for a loyalty membership for over a year without her knowledge. The committee's chairman, Sen. John Rockefeller, (D-W.V.) is holding a hearing, which the government will hear from witnesses and discuss the findings of its investigation. Watch it here. T For Texas, T For Tennessee! The virtue of courage is a prerequisite for the practice of all other virtues, because otherwise one is virtuous only when virtue has no cost. There are times when something needs to be done, and yet we know that if we step up and do this needful thing, we will pay a heavy personal price. -C.S. Lewis |
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