New York Attorney General Andrew Cuomo said today that post- transaction company Webloyalty has agreed to pay $5.2 million to settle an investigation into allegations that the company tricked users into registering for paid discount clubs. Five online retailers, including Orbitz and Shutterfly, also agreed to pay a total of more than $3 million.
The settlement stems from an investigation by Cuomo into allegations that online retail sites transferred customers' credit card information to Webloyalty, which then enrolled people in discount programs at a cost of $9-$20 a month. Cuomo recently announced an $8 million settlement with Affinion, a Webloyalty rival.
Webloyalty, along with Affinion and the other major post-transaction company, Vertrue, recently changed their practices to require consumers to re-enter their credit card information in order to enroll in discount clubs.
A Webloyalty spokesperson said in a statement that the company is "making it easier for consumers to know what they are buying and how they are paying for it."
Webloyalty, Affinion and Vertrue have all come under scrutiny for their data pass marketing programs. The programs involve sending pop-ups to consumers immediately after they make purchases on online retail sites. Previously, users who clicked on the pop-up ads were taken to a site where they could enroll in coupon programs simply by providing their email address and clicking a 'yes' button. Many people later said they didn't realize that they were enrolling because they hadn't re-entered their credit card information.
Last August, Webloyalty began requiring consumers to re-enter the last four digits of their credit cards. In January the company completely stopped using "data pass" methods, and instead required consumers to reenter all digits of their credit or debit cards.
Some federal lawmakers also are critical of post-transaction companies. Senate Commerce Committee Chairman Jay Rockefeller (D-W.Va.), who spearheaded a probe into "mystery charges," recently 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 also 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.
Cuomo said on Tuesday that Orbitz agreed to pay $1.2 million, while Shutterfly agreed to pay around $950,000. MovieTickets.com, TicketMaster and Pizza Hut also agreed to pay smaller amounts.