State of Connecticut v. Affinion Group Inc., Trilegiant Corporation, and Webloyalty.com, Inc.: A Stamford-based marketing company has reached a $30 million national settlement with 47 states, including Connecticut, and the District of Columbia after it was accused of using deceptive practices to attract members to discount clubs.
Affinion Group Inc. and its subsidiaries Trilegiant Corporation and Webloyalty.com, Inc. run multiple discount clubs and membership programs offering a variety of services, including credit monitoring, roadside assistance and travel.
The companies market these programs through a series of agreements with their marketing partners, which are well-known banks and retailers. The marketing companies present their programs to consumers, often immediately after a consumer has engaged in a transaction with that partner.
The programs are marketed via direct mail, online, telemarketing and during face-to-face point of sale transactions. The companies charge a monthly fee for their programs, which continue until consumers affirmatively cancel.
Consumers alleged that Affinion charged them for services without their authorization or knowledge, and once consumers learned they were being charged, some had trouble canceling their membership or getting a refund. Other consumers were confused about whom Affinion was because the offers looked like they came from Affinion’s marketing partners, typically the banks or retailers.
Most troubling to state attorneys general nationwide were two marketing practices of Affinion: live check and online data pass.
In a live check solicitation, consumers were sent an offer via direct mail 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 on a monthly basis indefinitely.
In an online data pass offer, consumers were presented with an Affinion offer immediately following their online purchase from a retailer. Affinion was then able to enroll and bill consumers without acquiring any of their account information because the marketing partner forwarded that information to Affinion.
As part of the settlement, both practices are prohibited. Additionally, Affinion is establishing a $19 million fund to provide refunds to consumers who received unauthorized charges for Affinion’s programs.
Also, a $25,000 separate payment will be made to the state of Connecticut. When adding the $19 million to all of the separate payments to 46 other states, the settlement will cost Affinion $30 million.
“This is a win for the consumers who were deceived by the misleading marketing practices of these companies, including a lack of clear and conspicuous disclosure about what the charges were, the reason for the charges and the recurring nature of charges,” Connecticut Department of Consumer Protection Commissioner William M. Rubenstein said in a statement. “Unfair practices such as these are unacceptable.”
The agreement will require the Stamford companies to provide clear and visible information to consumers about their membership, periodic reminders of their enrollment and information about their cancellation practices.
Affinion released the following statement to the Law Tribune regarding the settlement: “We are pleased to resolve outstanding concerns regarding our subsidiaries, Trilegiant and Webloyalty, with respect to certain legacy marketing practices for membership services. Both companies voluntarily ceased these practices several years ago, and they represented an insignificant contribution to revenues,” said the statement.
“The agreement does not include any fine or penalty payments,” the statement continues. “We have a long-standing history of employing the best marketing practices in the industry, and remain the industry leader in marketing standards and quality. Our programs provide tremendous value for millions of consumers worldwide, and we strive to ensure that our marketing always incorporates clear, prominent and unambiguous terms.”
In Connecticut, Assistant Attorneys General Michele Lucan, Sandra Arenas Charles, Jose Rene Martinez and Phillip Rosario, head of the Consumer Protection department, assisted Attorney General George Jepsen with this case.
Affinion was represented by Clayton S. Friedman, of Manatt, Phelps & Phillips in Costa Mesa, Cal. and Ronald R. Urbach of Davis & Gilbert in New York City. Peter F. Olberg, of Manatt, Phelps & Phillips’ New York City office, who is admitted to practice law in Connecticut, served as local counsel.•