Negative option marketer Affinion Group Inc. pays an additional $30 million in separate court settlement with Iowa, 46 other states & D.C.
(DES MOINES, Iowa) A Connecticut-based discount membership club operator will pay Iowa consumers over $5 million as part of a $6.2 million settlement with the state to resolve allegations that the company misled Iowa consumers into signing up and paying for discount club and membership programs through supposed “free trials.”
Attorney General Tom Miller announced the agreement with Affinion Group Inc. and its subsidiaries, Trilegiant Corporation and Webloyalty.com Inc., through a court order and a separate written agreement with the Consumer Protection Division.
The court order, through a consent judgment, is part of a $30 million settlement with 47 states and the District of Columbia concerning general consumer fraud issues. The separate written agreement with Iowa, through an Assurance of Voluntary Compliance, or AVC, settles the state's claims against the company for violating Iowa’s Membership Buying Club law.
"The separate agreement we reached with the company requires drastic improvements to how the company markets memberships to Iowans," Miller said. "It also channels $5 million into a special restitution fund for Iowa consumers, which we expect to use to provide substantial relief to every Iowa victim of Affinion's unlawful conduct." Miller also noted the unique strength of Iowa's law: "Iowa's development of the law regulating buying clubs has put our state in a very strong position in dealing with companies like Affinion."
Affinion and its subsidiaries run multiple discount clubs and membership programs offering a variety of services such as credit monitoring, roadside assistance, and discounted travel.
The companies sell these programs through a series of agreements with “marketing partners,” including prominent banks and retailers. Affinion markets to consumers often immediately following a transaction with a partner company via direct mail, online, telemarketing, and in face-to-face point of sale transactions. Affinion charges a monthly fee to consumers for these services, which continues until the consumers affirmatively cancel.
“We have all experienced an Affinion like attempt. You have a problem with your credit card bill, call the credit card company and resolve the issue. As you are about to hang up, they say you can get some benefits for free for a month. Some say yes in getting off the telephone. You receive a piece of junk mail that says somewhere if you don’t cancel in 30 days, you will be billed monthly for $9.00. The charge appears on your bill. You don’t recognize the company but it’s only $9.00 and leave it on your bill. You never use the benefits. The whole scheme is designed to slip all this by consumers,” Miller said.
According to Miller’s lawsuit filed with the proposed consent judgment, consumers have alleged that Affinion charged them for services without their authorization or knowledge. "We heard from lots of consumers who didn't realize they were paying monthly discount club or membership fees as a result of an unrelated transaction or special offer," Miller said.
Consumers also complained of problems canceling or obtaining refunds once they discovered the charges. Other consumers reported confusion about Affinion because the offers looked like they came from the company’s marketing partners, which usually were banks or retailers with which the consumers did business.
The states’ investigation uncovered several of Affinion’s marketing practices that misled consumers, including a lack of clear and conspicuous disclosure about Affinion’s identity, and the cost and ongoing nature of the charges.
The multistate group focused in particular on two Affinion marketing practices, one called “live checks,” and the other called “online data pass.”
With live checks the company mailed consumers an offer that appeared to be a check. When consumers endorsed and deposited the checks, they unknowingly authorized Affinion to enroll them in membership programs, and to bill them each month indefinitely.
Through its online data pass offers, Affinion marketed an offer immediately after the consumer completed an online purchase from the partner retailer. Affinion then enrolled and billed consumers without acquiring their account information because the marketing partner would pass that information to Affinion.
Today’s agreement prohibits both practices.
The settlement also forces Affinion to change its business model by requiring the company to provide clear and conspicuous information to consumers after enrollment regarding their membership, periodic reminders of their enrollment, and changes to Affinion’s cancellation practices.
"Consumers need to watch their credit card and debit card statements for unauthorized monthly charges,” Miller said. “We're trying to stop these practices through cases like this, but consumers need to know that these types of charges can pop up on their bills."
Affinion is establishing a national fund of approximately $19 million to provide refunds to some consumers who received unauthorized charges for Affinion’s programs. Iowans who believe Affinion, Trilegiant, or Webloyalty.com owe them refunds because they improperly charged them can file consumer complaints with the Consumer Protection Division at www.IowaAttorneyGeneral.gov or by calling 515-281-5926 or, toll-free, 1-888-777-4590.
The separate AVC settling the State’s Buying Club law investigation will result in an additional $5 million in refunds for Iowa consumers. Miller said that AVC refunds will not commence immediately, given the need to coordinate those refunds with the refunds required by the court order in the multistate settlement.
Consumers should file complaints with the Consumer Protection Division, which will help ensure that consumers receive refunds. The AVC requires Affinion to comply with Iowa’s Membership Buying Club law in all future sales covered by the law, which requires that the company give consumers verbal and two written notices of their right to cancel.
Miller noted that the disclosure requirements of the settlement will make it much clearer to consumers that they are making a purchase. “These requirements will really help consumers understand these offers,” Miller said. “By accepting these offers they are not just agreeing to a 'free trial,' they are making a purchase that will appear on their credit card bills every month until they cancel.”
Consumers checking their credit card and bank account statements should look for the names of Affinion’s membership programs, as often that is how the company’s charges appear on their statements.
Click here for a complete list of Affinion’s membership programs.
Under the combined court order and AVC, the Attorney General’s office will receive approximately $1.2 million to cover costs of the refund program, attorney fees, and court and other costs.
In addition to Iowa, the following states and the District of Columbia are included in the consumer fraud settlement: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming.
“Free Trial Offer” & Buying Club Tips
Be extremely wary of trial offers, “free trial” offers, and membership offers. Get the details and ask questions. Will you be billed automatically if you don’t cancel? By when must you cancel? How do you cancel? Will you receive a mail notice? Remember, they already may have your bank or credit card number to charge you.
- Examine your credit card bills every month, your checking account and debit card statements, other financial accounts, and phone bills. Watch for unauthorized charges, and dispute them at once, in writing.
- Watch your mail and email for notices that you will be billed unless you cancel. These mailings may look like junk mail or spam.
- Beware of cashing a check that comes in the mail with a “free trial offer.” The fine print may obligate you to future payments.