Advertising Law Blog

In light of significant scrutiny and criticism by Senator Jay Rockerfeller (D-W.Va) who is investigating membership club upsell marketing, Affinion has advised the Senator that it will now require full credit card entry for enrollment.

According to a recent letter Affinion's CEO sent to Sen. Jay Rockefeller (D-W.Va.), the company will require consumers to enter all 16 numbers of their credit or debit cards when signing up for membership programs after making e-commerce purchases and abandoning the data sharing approach whereby the upsell is funded by pre-acquired credit card information.

This development occurs as a result of Senate hearings held last fall. The U.S. Senate Committee on Commerce, Science, and Transportation, released an investigative report entitled: "Aggressive Sales Tactics on the Internet and Their Impact on American Consumers." The report explores the business aspect. The report concludes that three Internet companies-Affinion, Vertrue, and Webloyalty-allegedly exploit consumers' expectations about online shopping to trick them into joining their membership clubs by utilizing pre-acquired account information (known as "data pass") and free to pay conversions.

As part of the continuing investigation, Senator Rockerfeller has sent letters to Visa, American Express, and MasterCard requesting information relating to cardholder inquiries about unauthorized charges stemming from "data pass" and any efforts made by the companies to reduce the number of "chargeback" requests from cardholders. The letters also requested information regarding continuity programs that trigger a high charge-back rate.

As to Affinion's recent decision to require full credit card data entry by customers, the Senator announced: "I am pleased that Affinion has agreed to change the way they do business," said Chairman Rockefeller. "The Commerce Committee's investigation has produced overwhelming evidence that the aggressive sales tactics used by Affinion and other companies were misleading millions of American consumers. These companies charged millions of consumers' credit cards without ever obtaining the billing information directly from consumers. While Affinion's decision to end the so-called 'datapass' process is a positive step, this investigation is ongoing and will not end until all online shoppers are protected and online datapass marketing has been stopped."

Given the wide-spread usage of membership clubs using pre-acquired account information and free to pay conversions, marketers should pay close attention to the Senator ongoing scrutiny and re-evaluate, where appropriate, their marketing practices in this regard and with respect to other continuity offers.