Credit Card Companies Questioned In 'Mystery Charges' Probe

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As part of its continuing investigation into whether consumers were duped into enrolling in online discount clubs, the Senate has requested information from Visa, MasterCard and American Express.

"Consumers will only shop online if they are confident that their billing information will be used only for purposes they have authorized," Sen. Jay Rockefeller (D-W.Va) said in a letter sent last week to the credit card companies. "It concerns me greatly that the companies we are investigating have been able to acquire the credit and debit card numbers of millions of American consumers and bill them every month for services the consumers do not realize they have purchased."

Rockefeller asked the credit card companies for a host of information, including whether consumers who enrolled in online discount clubs subsequently requested refunds of the monthly membership fees.

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A recent Senate report on what Rockefeller terms "mystery charges" concluded that Web companies earned more than $1.4 billion in the last 10 years by tricking millions of online shoppers into purchasing monthly subscriptions for services they didn't want.

The investigation by the Senate Committee on Commerce, Science and Transportation previously focused on three companies in the post-transaction space -- Affinion, Vertrue and Webloyalty -- and more than a dozen online retail sites like Orbitz and Fandango.

Post-transaction companies target consumers who have just made purchases at retail sites by sending people pop-up ads that offer discounts. In the past, customers who clicked through landed on a site where they could enroll in coupon programs by providing their email address and clicking a 'yes' button. The retail sites then shared credit/debit card information with the post-transaction companies, which then began charging consumers monthly fees of between $9 and $12 and sending them coupons and discounts.

Many Web users have said they did not realize that their credit cards would be charged. A group of consumers also filed a class-action lawsuit against Webloyalty and other companies, which was settled for $10 million in August.

Since lawmakers began investigating in May, some online retailers have changed their procedures. Orbitz now requires people to enter the 3-digit security code on their credit cards when they sign up for a membership after making a purchase on the site.

Webloyalty recently revised its sign-up procedure to require consumers to re-enter the last four digits of their credit cards. The company also now says it sends at least 5 emails in the initial 30-day trial membership, before consumers are charged, and allows people to easily cancel.

American Express and MasterCard said they were cooperating with the Commerce Committee. "We share the Committee's concerns about the alleged unfair and deceptive practices and are in the process of investigating the disclosures made to consumers," an American Express spokesperson said.

A MasterCard spokesperson said the company also intends to conduct its own investigation "and will take appropriate action if we find that our rules are being violated."

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