NY Attorney General Andrew Cuomo Goes After Internet "Discount Club" Scam

You know all those opt-out buttons for discount offers you sometimes get when you are finishing an online purchase? The third-party companies running those discount programs may be signing you up for recurring "discount club" membership fees without your knowledge, courtesy of the credit card information you supplied to the original retailer. NY Attorney General Andrew Cuomo is going after 22 retailers for their involvement in the scam.

Cuomo sent subpoenas to websites for major retailers such as Barnes & Noble, Avon and Staples, which have deals with three companies that offer such discount programs, namely Webloyalty, Affinion/Trilegiant and Vertrue. Cuomo said in a statement on Wednesday that his office also reached an agreement with online movie ticket retailer Fandango to end similar practices. Fandango is a unit of Comcast Corp. Cuomo's investigation has found that online shoppers are often unknowingly directed to a membership program seller's website that is separate from the online retailer's site. Information about the membership program and its ramifications are often buried in fine print and cluttered text, Cuomo said. For instance, a customer clicking on the link automatically and unknowingly consents to a transfer of his or her credit or debit card account information. "Well-known companies are tricking customers into accepting offers from third-party vendors, which then siphon money from consumers' accounts," Cuomo said.

The three third-party membership clubs being investigated bring in more than $1B annually, much of it fraudulently, according to Cuomo. One discount club employee told Cuomo's office that 90% of their billings were made without the customers' knowledge. Other companies being subpoenaed include Orbitz, Ticketmaster, Priceline, and Gamestop.