The U.S. Senate has begun hearings to investigate the behavior of three big online companies behind online loyalty programs. The three companies: Vertrue, Webloyalty, and Affinion, have generated more than $1.4 billion through misleading programs that duped consumers into paying monthly fees on their credit cards.
Web retailers that signed deals with these companies to run these loyalty programs earned a total of $792 million. Small companies could see payments of around a million dollars and larger companies earned in the tens of millions of dollars.
Senate investigators launched their six-month inquiry by examining complaints from people who discovered mysterious charges on their credit card bill. For years, Web shoppers have complained that they were signed up to some Web loyalty program without their knowledge and were charged fees until they discovered the problem and complained. Some paid fees for years.
The government says the investigation shows that Webloyalty, Affinion, and Vertrue “trick” consumers into entering their e-mail address just before they complete purchases at sites such as Orbitz, Priceline.com, Buy.com, 1-800 Flowers, Continental Airlines, Fandango, and Classmates.com. A Web ad, which many consumers say appears to be from the retailer, offers them cash back or coupon if they key in their e-mail address.
Additionally the government’s report shows that the companies involved know full well that the majority of people signing up for the programs were unaware of the hidden costs to be charged on their credit cards. This is because the programs are designed from the ground up to be misleading.
The government investigation will continue into next year.