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.

Last fall, I wrote about a fantastic sign up bonus from Frontier Airlines.    The promotion was 20,000 miles when you got the card, and 20,000 more miles after you spent $750 before February 28th.    Considering Frontier offers a domestic award ticket for 20,000 miles, that was a fantastic deal.  My wife and I jumped on it, and immediately received the first 20,000 miles.      We then dutifully devoted $750 of our spending to the card, but never received the second 20,000 miles.   February 28th came and went with no bonus.

Calling Makes It Worse

I then called Barclay Bank, the issuer of the Mastercard to inquire as to when we could expect our promised bonus miles.   Their response astounded me.    The first person I spoke with disavowed all knowledge of the promotion!     I read the terms to him verbatim, and I was told point blank that the promotion did not exist!   I asked to speak with a supervisor, and I was told that none was available.    I then politely asked for the representative’s name, and I was hung up on.

On my second call, I immediately lodged a complaint against the representative I had previously spoken to, and was assisted by a more experienced and professional representative.   Despite her best efforts, it was clear that she had no information about the promotion either.    She even took the time consuming step of contacting Frontier Airlines to confirm the program exists and that Barclay Bank was responsible for awarding the miles.    Nevertheless, all she could do was to create a “case for executive review”, with the promise that someone would contact me in regards to this matter.

My next step, as a journalist and consumer advocate was to reach out to their public relations department to try to find answers.    I was assured that the promotion did exist, despite the best knowledge of their call center, and that the bonus miles would appear with my next statement following the end of the promotional period on February 28th.     The bank had no comment has to why the call center did not know of the existence of the promotion.

Finally, Here Are My Miles!

On March 10th, the miles finally did appear.    So the promotion appeared in November, I signed up for the card in December, made the qualifying purchases in January, and waited patiently until march to receive the bonus miles.    While this timetable is par for the course when it comes to credit card promotions, the information provided by Barclays was inexcusably poor.     Is it too much to ask to give some information to representatives about their own offer?    Could they not tell me the date in which the bonus miles will be credited?

Lessons Learned

From the moment the first representative I spoke with refused to acknowledge the existence of this promotion, I immediately regretted not taking screen shots of the entire offer.    Capturing a screen image on your computer is actually fairly easy.    For Windows users, just click on Alt-Print Screen, then open up the Paint program and press Control-V or choose Edit, Paste.     Finally, save the file as a .jpg file so it doesn’t take up much space.

Lacking a screenshot, I did have copies of articles in which myself and others wrote about the terms of this offer.     By themselves, those articles would not have been much good if I chose to go the legal route in small claims court, but it might have helped to convince someone that the promotion existed and that I complied with it’s terms.

In the future, I vow to never sign up for any credit card or promotion without saving the terms of the offer to my computer.     Even though Barclay Bank and Frontier eventually came through, I would prefer to play it safe.    Any time I accept an offer, I am going to create a file on my computer with all the information necessary for a fight.    In reality, I do not ever expect to have to take an airline or a credit card company to court, if only because having the promotion documented assures that the other party will always make good on the deal, rather allowing a case to proceed.