NY Attorney General Cuomo Investigates Online Retail Fraud
28 January 2010 - 3:51AM
Dow Jones News
New York Attorney General Andrew M. Cuomo said Wednesday his
office is investigating 22 online businesses for allegedly linking
consumers with discount promotions that end up charging them
unauthorized fees.
Visitors to online sites of retailers including Staples Inc.
(SPLS), Barnes & Noble Inc. (BKS), Avon Products Inc. (AVP) and
Orbitz Worldwide Inc. (OWW) "deceptively link" consumers to
fee-based membership programs run by third party companies that
charge unauthorized fees under the guise of discount offers and
also receive consumers' credit card numbers, Cuomo said in a
statement.
All told, Cuomo said his office has sent subpoenas to 22
well-known merchants that have deals with the three major companies
that offer these discount programs: Webloyalty, Affinion/Trilegiant
and Vertrue.
"Well-known companies are tricking customers into accepting
offers from third party vendors, which then siphon money from
consumers' accounts," Cuomo said.
When consumers shop online from familiar retailers, they are
often presented with a discount or cash-back incentive offer as
they complete their purchase. By clicking on the discount or
incentive banner, they are unknowingly directed to a membership
program seller's Web page that is separate from the online
retailer's site and recurring charges begin to appear on consumers'
credit or debit card bills from unfamiliar companies, Cuomo said.
Because the charges are often small they can go unnoticed for some
time.
The subpoenas sent by Cuomo's office seek information about
retailers' practices of sharing consumers' account information with
membership program companies, their knowledge of any deceptive
solicitations and what kind of compensation they may be receiving
from the membership companies.
The three membership program sellers being investigated bring in
revenues of more than $1 billion per year, much of which is amassed
through fraud, Cuomo said.
Many consumers have reported that the companies offering
membership programs make it difficult for consumers to cancel
memberships and obtain full refunds of the unauthorized
charges.
Cuomo said his office reached an agreement with online movie
ticket retailer Fandango to permanently end the practice of sharing
customers' credit and debit card information to discount program
sellers.
The allegations come as retailers have been using the Web to
boost sales, which have been struggling during the recession.
-By Karen Talley, Dow Jones Newswires; 212-416-2196;
karen.talley@dowjones.com
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