Cuomo probes online businesses

by Nick Rees |
Jan. 27, 2010, 4:39pm


NEW YORK (Legal Newsline) - Twenty-two online businesses are being investigated by New York Attorney General Andrew Cuomo over allegations that they deceptively link unsuspecting consumers, under the guise of discount offers, to fee-based membership programs that charge unauthorized fees.

An agreement has also been reached with online movie ticket retailer Fandango to end similar practices.

The membership programs, Cuomo's investigation has revealed, are often presented when consumers shop online from familiar retailers. When consumers complete their purchase, they are presented with a link to a discount or cash-back incentive.

Clicking on the link unknowingly directs the consumer to a membership program seller's web page separate from the online retailer's site.

Fine print and cluttered text buried on the page informs the consumer that they are joining a membership program and that the ramifications of joining include an agreement to transfer a consumer's credit or debit card account information, Cuomo says.

After joining, small and recurring charges begin to appear on the consumer's credit or debit card from unfamiliar companies, Cuomo says.

"This online scheme has impacted the finances and tried the patience of tens of millions of consumers nationwide," Cuomo said.

"Well-known companies are tricking customers into accepting offers from third party vendors, which then siphon money from consumers' accounts. I commend Fandango for doing the right thing by ending the practice of sharing consumers' financial information with these discount club sellers. I expect the other businesses to follow Fandango's lead and adopt these reforms to protect consumers who shop online."

Twenty-two merchants, including Barnes & Noble,,,,,,,,, Budget,,, GMAC Mortgage,, Travelocity, Vistaprint, Intelius,, Expedia/, Columbia House, Pizza Hut and Gamestop/EB Games, have been sent subpoenas by Cuomo. These companies have deals with Webloyalty, Affinion/Trilegiant and Vertrue, the three major companies offering discount programs.

Cuomo's agreement with Fandango requires them to permanently end their practice of sharing customers' credit and debit card information to discount program sellers.

The settlement also implements reforms to protect online shoppers from being deceived by discount and cash-back advertisements appearing on the company's web site. Contracts with any discount program sellers will be suspended by Fandango while it implement the changes. Additionally, Fandango will pay $400,000 into a consumer redress fund.

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