New York Closes Book On 'Data Pass' Marketing, Collects $10MM In Fines

Post-transaction company Affinion, which allegedly duped Web users into signing up for paid subscriptions to discount clubs, has agreed to pay $8 million to settle a probe by New York Attorney General Andrew Cuomo.

Additionally, Classmates Online, FTD, Inc. and three other companies that allegedly had deals with post-transaction companies have agreed to pay a total of $2 million.

The settlement resolves New York's investigation into "data pass" marketing, which occurs when online retail sites transfer customers' credit card information to third parties like Affinion, which then enrolled consumers in discount programs at a cost of up to $20 a month.

Affinion and the other major post-transaction companies, Webloyalty and Vertrue, recently changed their practices to require consumers to re-enter their credit card information in order to enroll in discount clubs.

Post-transaction outfits target consumers immediately after they made purchases on online retail sites by sending pop-up ads that offer discounts. In the past, people who clicked on the pop-ups landed on a site where they could enroll in coupon programs simply by providing their email address and clicking a 'yes' button. Many consumers later said they didn't realize that they were actually enrolling because they hadn't re-entered their credit card information.

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Affinion said in a statement that it had ended datapass practices "in an effort to improve the quality of its marketing."

Cuomo isn't the only politician to take aim at datapass marketing. Senate Commerce Committee Chairman Jay Rockefeller (D-W.Va.), who spearheaded a senate probe into "mystery charges," has proposed banning companies from enrolling consumers in paid-subscription programs unless the consumers entered their credit card numbers and agreed to the program.

Rockefeller's measure also would restrict online companies' ability to use "negative options," which often involves offering people free trials and then charging them unless they cancel the plan.

A recent senate report found that Web companies garnered more than $1.4 billion in the last decade through post-transaction programs. The report additionally identified 19 companies that made more than $10 million each through partnerships with post-transaction companies. Those businesses include 1-800-Flowers.com, Classmates.com, Fandango, MovieTickets.com Orbitz, Shutterfly and Travelocity. Classmates.com alone earned more than $70 through such arrangements, according to the report.

Classmates agreed to pay nearly $1 million to settle Cuomo's investigation, while FTD, Inc. agreed to fork over $640,000.

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