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The Sad Truth About The Budget Trilegiant Scam

by Jason Steele

This is Part Four in my series on the Budget/Trilegiant Scam that I have been investigating.

In part one, I told you about the solicitation I received, in the form of a check, from Trilegiant, to join a specious “membership club” in which they would charge my credit card “on file with Budget”.     In part two, we learned more about Negative Option Billing and Pre-aquired Account Marketing.    Since then, I have been trying to verify which credit card Budget has on file for me.    In Part Three, I discovered that Budget representatives have no way of determining what credit card they give out to the Trilegiant/Affinion scammers.

The Big Picture Emerges

I would like to think that such obvious scams as negative option billing and pre-acquired account marketing would be illegal, but they are not.  I would also like to believe that supposedly reputable merchants, such as Budget Rent A Car would not give your credit card out to scammers, but they do.     It would also be nice to imagine that credit card companies would prohibit their merchants from giving your billing information out to scammers, but that is where this story gets strange.

I have been corresponding with a representative from American Express, as it was my American Express card that I used for my last Budget rental.    I pointed out to her that their publicly available Merchant Guide seems to prohibit exactly what Budget and Trilegiant are doing.  The most relevant statements I found were the following:

In section “3.3, Prohibited uses of the Card”

Merchants must not accept the Card for any of the following:

illegal activities and/or fraudulent business transactions,

sales made by third parties or Entities conducting business in other industries

Section 3.4 states:

Merchants generally must not disclose Cardmember Information, nor use nor store it, other than to facilitate Transactions in accordance with the Agreement.

Finally, Section 8.3 states:

Merchants must, and they must cause their Covered Parties, to:

store Cardmember Information only to facilitate Transactions in accordance with, and as required by, the Agreement

What Does This Mean?

For a non-lawyer, I am pretty good at interpreting legalese, and this seems pretty clear cut to me.    These companies are blatantly  violating their merchant agreement with American Express and other credit card processors, and they have been doing so for a long time.  According to Mark Ashley of the blog Upgrade Travel Better, this has been going on since at least 2005.

My contact at American Express informed me that this issue had been addressed in a recent Senate hearing.   At that hearing, Professor Prentiss Cox, the author of the report on pre-acquired in the Harvard Journal on Legislation presented the case against pre-acquired account marketing.    You can read his testimony here, which is very similar to his journal article that I summarized in Part Two of this series.     Another witness was Ben Edelman, an assistant professor at the Harvard Business School in the Negotiation, Organizations & Markets unit.    You can read his statement for the record and refer to his website has a wealth of information about this subject.

On his website, he reaches the same conclusion that these companies are violating their merchant agreement with American Express:

American Express’s Merchant Reference Guide prohibits the automatic transfer of customers’ card numbers. American Express rules provide that “Merchants … must not disclose Cardmember Information… other than to facilitate Transactions in accordance with the Agreement” (p.7) (emphasis added). No provision of the agreement authorizes a merchant to transfer a customer’s card number to another merchant. Furthermore, for a card-not-present charge, a merchant “must … ask the Cardmember to provide: … Card Number” (p.12) (emphasis added). No provision authorizes a merchant to obtain a customer’s card number in any way other than by asking the customer to provide such number. Thus, post-transaction marketers violate American Express policies when they obtain customer card numbers by making copies from other merchants.

I never received a direct answer addressing how corporations can get away with violating their merchant agreement, but perhaps Professor Edelman will.    He wrote a letter to American Express’s Executive Vice President and General Council, stating, in part;

“American Express need not sit idly by the wayside while its rules are flouted, to consumers’ detriment and to the detriment of the trust and reputation of the American Express network. I look forward to American Express taking action to protect customers from these important problems.”

If  Professor Edelman of Harvard University cannot receive a response from American Express, perhaps Senator John D. Rockefeller of Virgina, the chairman of the Senate Commerce Committee can.   He sent a letter to the CEO of Amex in an effort to get some answers as to why they allow this practice, one that is actually prohibited by their merchant agreement.    He also tried to determine how much money Amex is making off of the merchant fees it receives from these types of transactions.

To be fair, Visa and Mastercard also have similar rules in their merchant agreements, yet they inexplicably continue to allow this practice to continue.   They too received similar letters from Professor Edelman and Senator Rockefeller.

Conclusions

Until such time as these practices are outlawed, there are three legs that must be held up to make this deceptive trade practice feasible.   In addition to the original recipient of the consumer’s credit card information, and the “membership club” operator which charges the consumer, the credit card company itself must permit this kind of transfer of credit card information.

Like Professors Edelman and Cox, I feel it is time for American Express, MasterCard, and Visa to put an end to these outrageous practices.    So long as they continue to allow pre-acquired account marketing, they share a healthy dose of the blame.

There are millions of victims of these scams, which have stolen billions from hard working Americans.  Until the major credit card companies decide to enforce their existing merchant agreements, I can only conclude that they are willing accomplices.

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6 Responses to “The Sad Truth About The Budget Trilegiant Scam”

  1. oasisman Says:

    Great series…very informative. These “checks” come in the mail every few weeks…thanks for digging up all the info.

  2. Eric Says:

    so in the end i guess you can’t do anything :/

  3. Len Penzo Says:

    Wow. Great series, Jason! Of course, if merchants ARE violating their card-holder agreements will Amex and the other companies then it is incumbent upon them to either drop them like a hot potato or impose some sort of punitive sanctions.

    To look the other way would not be a good business practice for the CC companies in the long run.

    All the best,

    Len
    Len Penzo dot Com

  4. ed kohl Says:

    Amex,visa ect.are in this for the fees from this co.Amex,Visa etc. have requirement to shut any merchant account down if their charge back from card holders is above 1%. It is clear the major credit card companies are profiting from this scam which thousands of victms are taken. How is it possible that law inforcement allows this scam to continue? Multi million dollar fines is a drop in the bucket and a small cost of doing business or fraud while the major credit card companies, banks, big business(who give private data away to profit).And is this huge company allowed to keep stealing from the public because the multi million dollar fines also are profitable?

  5. Elizabeth Says:

    YES – you can do something. (Very informative postings, Jason)!

    Contact Freed & Weiss: info @ FreedWeiss (dot) com (no spaces)
    Or call toll free: (866) 779 – 9610.

    They are working to stop this consumer abuse.

    Here’s some extra information. (You can also join the facebook group I created to help spread the word).
    http://www.facebook.com/home.php?sk=group_128046050590305

    Customers of websites like 1-800-Flowers.com, Travelocity, Shutterfly, and Orbitz are reporting mysterious monthly reoccurring charges to their credit cards.

    Thanks to marketing tactics (i.e., those pop-up windows) used during check out, without proper consent consumers are accidentally joining club memberships and having to pay for them monthly!

    Most people don’t even realize they are being charged every month for a service they never ordered!

    Is this happening to you? Have you made a purchase for travel, work, or fun using any of the following sites:

    1-800-Flowers.com,
    Hotwire.com,
    Orbitz,
    Classmates.com,
    Barnes&Noble.com,
    Ticketmaster.com,
    Avon.com.
    Budget,
    Staples.com,
    Travelocity,
    Expedia/Hotel.com,
    Columbiahouse,
    Buy.com,
    FTD,
    Intelius,
    Gamestop/
    EB Games.com,
    Airtransholdings.com,
    Continental Airlines,
    Shutterfly Inc.,
    US Airways
    Vistaprint USA
    Redcats USA
    Pizza Hut
    Movie Tickets.com
    GMAC Mortgage

    Join the cause to learn more and stop the consumer abuse from Trilegiant.

    AND PLEASE CONTACT US IMMEDIATELY if you – or anyone you know – has reoccurring charges after purchasing from any of these companies.

    Contact us by emailing: info @ FreedWeiss (dot) com (no spaces), or calling: (312) 220 – 0000, or toll free (866) 779 – 9610

    Help Spread the Word to Your Friends!

  6. pete cirea Says:

    “Most people don’t even realize they are being charged every month for a service they never ordered!”

    this made me laugh…. a lot so i came up with this one….

    – most people are retarded

    Internet has been out since 1973, so 40 years later, the internet is still not mature? Doubtful. Whoever doesn’t look at their credit card statements doesnt deserve to have a credit card. If you clicked on something by accident and you got charged, then you made a mistake. Computers don’t make mistakes. People do.

    Do you really believe over 50 companies are scamming consumers? You’ve got to be kidding. Are there special tactics used in trying to squeeze every dollar out of consumers? Absolutely, its called capitalism. Look at your energy bill and tell me why you pay a tax on the “delivery” of your energy, before you even pay a tax on the “actual” energy that is delivered, that you use, atop of paying for the actual energy you use. Wouldn’t logic tell us that in order for the energy to be used it has to be delivered first? But we pay for both? These types of things exist in many forms in many industries, and on all mediums.

    As far as terms go, fraud, scam, and so on, its none of that. People need to be educated about real scams, and real fraud, not ones that are classified as such as a byproduct of ignorance and neglect to such subject matter.

    “Subscription” is a business model that has been around like, since we found out that gold and silver were rare metals that came from stars bursting.

    Instead of spending allll of this effort on trying to fight the charge, just simply be more careful when you pay for stuff, and be more aware of where your money is going if and when its going somewhere you dont expect it to be going. If you dont notice, then you just have way too much money anyway.

    I am scammed every single day when I have to pay for a toll, for a bridge that has been paid off for 30 years. Why? Because it lets people have jobs and have families and have roofs over their head and law enforcement making sure they dont get murdered for that silver and gold. Get the idea?

    I welcome any thoughts, feedback, rebuttals. Be prepared though. I am not retarded.

    =P

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