Membership only clubs fork over $30 million for misleading ads

ID-100128578Kind of makes you feel special to join a club, doesn’t it? Well… Not when membership costs good money you didn’t realize you’d have to pay and you don’t get the benefits you were promised. And they don’t even teach you the secret handshake.

Following a multi-state investigation, Texas, 47 states and the District of Columbia recently obtained a $30 million judgment against a group of membership only clubs that didn’t deliver: membership program providers Trilegiant and Webloyalty, and parent company Affinion.

The defendants had several membership-only services that were promoted to customers. These included programs that promised reduced-cost travel, roadside assistance and credit monitoring.

Investigators allege the defendants used unlawful practices to recruit and deceive customers. Under the agreement, the defendants must pay restitution and provide full and clear disclosure about the terms of the memberships to customers who voluntarily enroll in their programs.

The defendants also allegedly billed customers each month without disclosing the fact that the customers were obligated to a third party not affiliated with their banks or retailers. That required customers to take steps to make sure they had cancelled the services to stop the billing. Many could not obtain requested refunds from defendants. The $19 million restitution fund included in the total payment to states will address these concerns.

Two specific practices that prompted the states’ enforcement action included:

  • Use of “live check” solicitations. Customers were sent live checks via direct mail solicitations. When they deposited those checks they didn’t realize that just by cashing the check, they were automatically enrolling in one of the defendants’ services.
  • Online data pass offers. Customers received defendants’ offers immediately after making an online purchase from a retailer. Trilegiant and Webloyalty were then able to enroll and start billing them using personal account information the retailer had conveyed during the purchase.

Texans seeking refunds from Affinion and its subsidiaries may file complaints with the Office of the Attorney General by calling (800) 252-8011 or complete a complaint form online at www.texasattorneygeneral.gov.