Alert – “Restore Online Shoppers Confidence Act” – New Bill Introduced Will Make Can Spam Act Seem Like A Minor Inconvenience

Senator Rockefeller has introduced a new bill entitled ‘‘Restore Online Shoppers’ Confidence Act’’. This bill follows a new Commerce Committee Staff Report, the second of two which claimed to demonstrate that some of the largest players – Affinion, Vertrue, and Webloyalty —used overly aggressive sales tactics to enroll online consumers in services without their consent and developed policies designed to prevent online consumers from getting refunds.

The first staff report, released in November 2009, revealed how Affinion, Vertue, and Webloyalty used a set of online sales tactics to charge millions of consumers for memberships and services the consumers were unaware they had purchased. The report found that these companies bilked millions of Americans out of more than one billion dollars by partnering with legitimate websites that were willing to share their customers’ billing information, including credit and debit card numbers, for financial gain.

The new Commerce Committee staff report set forth the consumer experience when they contacted Affinion, Vertrue, and Webloyalty to get their money back. Findings of the new report included:

  • Refund Mitigation: In a practice known as “refund mitigation,” the three companies created scripts and policies intended to minimize the amount of money they would have to return to consumers who had inadvertently enrolled in the clubs. For consumers who insisted on refunds, the companies employed a variety of tactics to keep the refund amounts as small as possible, including requiring customers to obtain refunds by completing written affidavits.
  • Magic Words: Each company instructed their call center representatives not to issue refunds to consumers, unless the consumers mentioned certain key words like “attorney general,” “Better Business Bureau,” or “bank representative.”
  • Multiple Memberships: Because they could encounter the aggressive sales tactics while shopping on hundreds of different websites, online consumers were frequently enrolled inadvertently in multiple membership clubs offered by the same company. Consequently, many consumers who cancelled one membership were actually enrolled in more than one of the same companies’ clubs. Agents were instructed not to inform consumers about these additional memberships.

Chairman Rockefeller’s bill which is sponsored by Senators Mark Pryor (D-Ark.), Bill Nelson (D-Fla.), Amy Klobuchar (D-Minn.), Claire McCaskill (D-Mo.) and George LeMieux (R-Fla.) will:

  • Prohibiting on line companies from using misleading post-transaction advertisements by requiring them to clearly disclose the terms of the offers to consumers, and to obtain consumers’ billing information, including full credit or debit card numbers, directly from the consumers.
  • Prohibiting Internet retailers and other commercial websites (“initial merchants”) from transferring a consumer’s billing information, including credit and debit card numbers, to post-transaction third party sellers.
  • Requiring companies that use “negative options” on the Internet to meet certain minimum disclosure and enrollment requirements, so consumers will not end up paying recurring fees for goods and services they did not intend to purchase.

If this bill is passed, then full notice and affirmative consent will be required before any data of consumers may be transferred between online marketers. This bill should be watched carefully.

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