RICHARD BLUMENTHAL – ‘Deceitful tactics don’t pay’

A national bank and Connecticut-based credit card company have entered into a settlement agreement with the state for allegedly playing a part in deceiving customers into enrolling in membership clubs that entitled them to discounts on goods and services.

A statement from Connecticut Attorney General Richard Blumenthal’s office said New York City-based Chase – part of JP Morgan Chase – and Norwalk-based Trilegiant Corp. solicited consumers with “free” trial offers in membership programs, but did not adequately inform them that they would be charged automatically if they did not cancel by a specified time.

Connecticut and 16 other states entered into a $14.5 million settlement with the two companies, Blumenthal and Department of Consumer Protection Commissioner Edwin R. Rodriguez announced earlier this week. According to the attorney general’s office, Trilegiant will pay Connecticut consumers $572,539 and Chase will pay them $175,000, in addition to restitution directly paid to hundreds of consumers in the state.

“Thousands of consumers unwittingly enrolled in discount club memberships – but only Trilegiant and Chase enjoyed the benefits,” Blumenthal said in a prepared statement. “Most consumers never received the discounts – even after paying for them – because they didn’t know they were members. More than the money, this settlement is significant for its message: Deceitful business tactics don’t pay. Consumers should heed the lesson that a check in the mail may cost more than it’s worth.”

The attorneys general involved in the settlement said the deceptive solicitations often included a check for a small amount of money, which many consumers assumed were rebates or rewards. But by cashing the checks, the consumers unknowingly agreed to pay for the membership program after the trial offer ended, according to Blumenthal’s office.

The solicitations often were included in consumers’ mortgage or credit card statements, or in mailings with Chase’s logo on the envelope or letterhead. If customers did not cancel the membership programs by the required time, Trilegiant automatically billed the membership fees to the consumers’ credit card or loan on a monthly or yearly basis, and continued to charge them until they cancelled their membership.

The membership programs include AutoVantage Gold Service, AutoVantage Service, Buyers Advantage Service, CompleteHome Service, Just for Me, Pet Privileges Service, Shoppers Advantage Service and Travelers Advantage Service.

“Many Chase customers who had complaints against Trilegiant about unwanted memberships were frustrated by how easily the membership charges were automatically billed to their credit card accounts without their knowledge,” Rodriguez said in a prepared statement. “Apparently, Chase had a hand in its customers’ pockets, with final approval over these solicitations in the first place.”

‘Very Pleased’

In a statement released by Trilegiant, spokesman Todd Smith said, “Trilegiant reached an amicable settlement with 17 states relating primarily to Trilegiant’s use of a live check offer in its marketing practices. Trilegiant was very pleased with the outcome of the settlement, which in many instances does no more than memorialize its existing best practices.”

“Chase believes the disclosures involving the third-party products and services that it offers to its customers, including the cost of those products and services, are clear and complete,” Jessica Iben, a spokeswoman for Chase, wrote in an e-mail. “We settled to avoid protracted litigation.”

The agreement between Chase and Trilegiant granted Trilegiant access to Chase’s customers in order to market the membership programs. According to a statement from Blumenthal’s office, Trilegiant used Chase’s name, and Chase reviewed and approved marketing materials used by Trilegiant, the attorneys general said.

The settlement prohibits those practices in the future, and compels Trilegiant or any company that solicits Chase customers in a similar manner to clearly disclose all terms of any “free trial,” including when and how the customer will be billed for any membership – and how to cancel.

The settlement also forbids Chase and Trilegiant from using other deceptive marketing techniques, including claims that the solicitations are a “reward” or “rebate.”

Consumers who enrolled in a Trilegiant club membership through any bank or other company – and who were first charged membership fees on or after July 1, 2001 – are eligible to receive restitution. Trilegiant also must send renewal notices to consumers who have active memberships, advising them that they have purchased a membership and explaining how to cancel the membership if they wish.

Joining Connecticut in the settlement are attorneys general from Alaska,

California, Illinois, Iowa, Louisiana, Maine, Michigan, Missouri, New Jersey, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, Vermont and Washington.