Telemarketing Company Promises Reforms

Attorney General Spitzer today announced a settlement with a national telemarketing firm accused of deceptive marketing tactics aimed at customers whose personal information was shared between financial institutions and marketing firms.

The settlement is the second in a year aimed at reforming telemarketing companies' access and use of personal financial information without a consumer's knowledge or consent. It calls for improved disclosure, consent requirement, and an end to deceptive practices.

BrandDirect Marketing, Inc., a Connecticut-based telemarketing company, settled allegations of telemarketing abuses in connection with its sales of club memberships which offer consumers alleged savings on a variety of products and services involving entertainment, shopping, home improvement, and health care.

"My office is carefully reviewing the representations made by telemarketers," Spitzer said. "Improving disclosures and strengthening privacy protections by limiting who has access to financial data has become increasingly important as advances in technology provide easier and more abundant access to credit information."

BrandDirect made wide use of negative option plans with its "risk free" 30-day free trial membership offer. Although these plans offer consumers a free period in which to consider the advantages of the service, many who accepted the initial free trial did not understand that BrandDirect had access to their credit card numbers and would charge them if they failed to cancel during the trial period.

In September 2000, Spitzer's office announced a similar settlement with MemberWorks, Inc. to address similar marketing tactics.

Under the terms of the settlement, BrandDirect agreed to:

  • Clearly disclose the negative option method up front and again before renewal;
  • Tape every consumer's "consent" to ensure it is knowingly given;
  • Ensure that accurate, non-misleading information is provided about the value of the membership;
  • Clearly disclose that it is not their financial institution offering the product or service and that the marketing company already has access to credit card numbers for billing purposes.

BrandDirect also agreed to automatically double the refund for consumers who complain about non-authorization of credit card charges if it cannot produce the taped consent.

BrandDirect agreed to pay $75,000 to cover the costs of the investigation and to issue refunds to individuals whose credit cards had previously been charged for memberships without their consent. Individuals have until September 1, 2001 to complain to BrandDirect.

Financial privacy has remained a top priority for Spitzer since he advanced his comprehensive privacy agenda last year. Spitzer authored legislation that would require financial institutions use an "opt-in" before sharing customer account information. Other legislation in the privacy agenda includes:

  • Information Brokers: would mandate that consumers have an opportunity to review any data information brokers have acquired about them and "opt-out" of having their information shared;
  • Internet Privacy: would require"opt-in" consent before web site operators could exchange information gathered about a site visitor;
  • Junk E-mail: would require "spam" marketers to provide consumers with an "opt-out" to stop future unsolicited e-mail advertisements;
  • Credit Reporting: would (1) require that a person procuring a credit report for resale disclose to a consumer reporting agency the permissible purpose of the end user; (2) require that those who resell consumer credit reports to follow procedures to ensure that the report is used for permissible purposes only; and (3) forbid the furnishing of header or biographical information for use in direct marketing transactions not initiated by the consumer where the consumer has opted out;
  • Identity Theft: would criminalize ID theft and would recognize consumers as true victims by allowing them to sue for damages.

This case was handled by Assistant Attorneys General Stephen Mindell and Herb Israel.

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