A.G. Schneiderman Secures $2 Million In Settlement With Companies That Tricked Consumers Into Signing Up For Online Discount Clubs With Hidden Fees
Vertrue And Adaptive Marketing To Pay $2 Million In Refunds To New Yorkers Who Were Duped While Shopping Online
Agreement Requires Companies to Reform Online Marketing Practices After Scheme Was Uncovered
Schneiderman: This Settlement Helps Make The Internet A Safer Place For Consumers To Shop
NEW YORK - Attorney General Eric T. Schneiderman today announced a settlement with Vertrue Incorporated and its subsidiary, Adaptive Marketing, LLC (collectively “Adaptive”) to provide $2 million in refunds to New York consumers who were tricked into enrolling online in Adaptive's discount club programs and then charged hidden fees. Adaptive also agreed to reform its online marketing practices.
“This scheme tricked thousands of New York consumers into unknowingly signing up for memberships programs they did not want or need,” said Attorney General Schneiderman. "The discount-club seller Adaptive profited by luring consumers with enticing but deceptive offers that included hidden membership fees. This settlement helps make the Internet a safer place for consumers to shop."
The Attorney General’s investigation found that Adaptive entered into arrangements with many well known retail companies, such as Classmates, Intelius and VistaPrint, that permitted Adaptive to solicit the companies' customers by offering discounts, rebates, or other incentive offers while the customer was shopping online. When a consumer accepted what he or she thought was the retailer's online offer, the consumer was unknowingly transferred to an Adaptive webpage and automatically enrolled in Adaptive's fee-based membership program. Because Adaptive obtained a consumer's credit or debit card account information from the retail partner, consumers were not required to re-enter their credit and debit card numbers and were unaware that they were being enrolled in Adaptive's fee-based membership program.
After a brief "free trial" period, Adaptive would charge the consumer's credit or debit card approximately $15 or more monthly until the consumer proactively canceled the membership. Consumers often incurred these fees for months on end without realizing that they had been enrolled in these programs. Even after consumers noticed these charges on their credit or debit card statements, many experienced difficulties cancelling the fee-based programs when they contacted Adaptive for that purpose.
Information about joining Adaptive's discount club program, the monthly fees, and the secret transfer of the consumer's credit or debit card account information was buried in fine print and cluttered text on the webpage so that most consumers were not aware that by accepting the discount offer, they were being enrolled in Adaptive's fee-based programs. Few "members" of these programs actually used any of the programs’ offered discounts and benefits, presumably because they did not know they were enrolled in the programs.
As part of the settlement with Attorney General Schneiderman’s Office, Adaptive agreed to implement important reforms to protect New York’s online shoppers from being deceived by discount and cash-back advertisements. These reforms require Adaptive to:
- Ensure that consumers understand that that they are enrolling in an Adaptive membership program;
- Require consumers to enter their full credit or debit card numbers and other billing information on the discount club seller’s enrollment page before enrolling the consumer in an Adaptive membership program;
- Warn consumers that the incentive being offered is for joining a separate company’s membership club;
- Notify consumers when they are redirected to a discount club seller’s site that they are leaving the original retailers' websites;
- Provide a consumer-friendly exit, such as a "No Thanks" button, from any discount club seller's solicitations that interrupt the completion of the consumer's transaction with the original retailer.
A number of these reforms go further than the federal Restore Online Shoppers' Confidence Act (“ROSCA”), which banned the practice of third party sellers obtaining consumers’ billing information directly from the retailer, a practice commonly referred to as “data pass,” effective December 29, 2010.
New York consumers who were unknowingly enrolled in an Adaptive program via data pass between January 1, 2007 and January 31, 2010 (Adaptive stopped using data pass in January 2010) will be eligible to receive refunds through a notice and claims process that will be administered by an independent entity supervised by the Attorney General's Office.
In addition, Adaptive is required to provide a refund to any New York consumer who was enrolled in an Adaptive program via data pass at any time and informs the company they were unknowingly enrolled in the program and/or were charged a membership fee without their knowing authorization, with certain conditions. Refunds are also available for consumers who were not allowed to cancel their membership upon request.
Adaptive’s membership programs include:
- At Home Rewards
- Passport to Fun
- Privacy Matters 1-2-3
- Privacy Matters Identity
- Privacy Plus
- Shopping Essentials
- Your Savings Club
The Attorney General’s office has previously reached agreements with major discount club sellers Webloyalty, Affinion and Encore Marketing, as well as a number of well known retailers that partner with Adaptive and these other discount club sellers.
What Consumers Should Do to Protect Themselves Against Unauthorized Charges:
Consumers should carefully review their credit and debit account statements each month to ensure that all charges have been authorized. Consumers who discover unauthorized charges from discount club sellers should call the 1-800 number listed with the charge on their account statement to cancel their membership and/or request a full refund. Consumers should also inquire whether they are members of any other programs from that particular seller in order to ensure they cancel all memberships and/or receive all refunds. Consumers may also contact the Attorney General’s Office at: 1-800-771-7755 or visit: www.ag.ny.gov.
Consumers should carefully read the fine print provided with any discount or service offers, particularly when shopping online. Seemingly attractive "free" or "limited trial" offers often come with significant strings attached.
The investigations were handled by Assistant Attorney General Laura J. Levine and Special Counsel Carolyn Fast with the Bureau of Consumer Frauds & Protection under the supervision of Deputy Bureau Chief of the Bureau of Consumer Frauds & Protection Jeffrey K. Powell and Executive Deputy Attorney General for Economic Justice Karla G. Sanchez.