|by Jason Steele|
Earlier this year, I tried my hand at a little investigative journalism after being solicited for a scam that would have fraudulently utilized my credit card information from a past transaction. You can read my expose on the Budget Trilegiant scam, which begins here.
Visa Takes Action
Recently, I read this encouraging article about actions that Visa is taking regarding the online version of this scam. According to the article; “Retailers will no longer be able to allow third parties to charge a customer’s card without the card owner re-entering credit card information, Visa said Tuesday. This is Visa’s response to one of the biggest scandals to rock online retailing in years.”
You can read Visa’s press release here.
Visa suggests that cardholders do the following:
Take time to read the fine print and understand all terms and conditions, so what you think is a free or discount offer doesn’t turn into recurring charges you didn’t intend to make.
- Review card statements when you get them for any unauthorized charges, and notify the card issuer promptly of any unusual activity.
- Try to resolve the situation with the merchant. If you’re unsuccessful, contact the card issuer immediately to dispute the charge.
Visa’s announcement seems directed at the online version of this scam, which is a combination of pre-acquired account marketing and negative option billing. Briefly, pre-acquired account marketing is the practice of charging consumers account information that they had given out for a previous transaction. Negative option billing is the practice of charging an account when a consumer fails to take an action to prevent it. Such actions can include un-checking a box online that is checked by default, or calling a company to cancel a “membership” program. The combination of pre-acquired account marketing and negative option billing is especially effective at charging unknowing customers for unwanted services.
According to the article, Visa will require that online merchants have customers re-enter their account information in order to be charged for the “post transaction” services. It is unclear if these new requirements will affect the tradition offline “offers”, like the Budget/Trilegiant scam that I was solicited for.
Requiring that merchants obtain cardholder information specifically for each third party transaction is common sense rule that should be applied by all the major card processors for both online and offline transactions. If a customer truly wishes to purchase a product from a third party, they should be required re-enter their account information. Cardholders have a reasonable expectation that their account information is not being shared with unscrupulous third parties, but at present, that is not the case.
I will be looking to see if MasterCard and American Express will follow Visa’s example and prohibit these scams.