This is Part Four in my series on the Budget\/Trilegiant Scam that I have been investigating.<\/p>\n
In part one<\/a>, I told you about the solicitation I received, in the form of a check, from Trilegiant, to join a specious \u201cmembership club\u201d in which they would charge my credit card \u201con file with Budget\u201d.\u00a0\u00a0\u00a0\u00a0 In part two<\/a>, we learned more about Negative Option Billing and Pre-aquired Account Marketing.\u00a0\u00a0\u00a0 Since then, I have been trying to verify which credit card Budget has on file for me.\u00a0\u00a0\u00a0 In Part Three<\/a>, I discovered that Budget representatives have no way of determining what credit card they give out to the Trilegiant\/Affinion scammers.<\/p>\n The Big Picture Emerges<\/strong><\/p>\n I would like to think that such obvious scams as negative option billing and pre-acquired account marketing<\/a> would be illegal, but they are not.\u00a0 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.\u00a0\u00a0\u00a0\u00a0 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.<\/p>\n 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.\u00a0\u00a0\u00a0 I pointed out to her that their publicly available Merchant Guide<\/a> seems to prohibit exactly what Budget and Trilegiant are doing.\u00a0 The most relevant statements I found were the following:<\/p>\n In section “3.3, Prohibited uses of the Card”<\/strong><\/p>\n Merchants must not accept the Card for any of the following:<\/em><\/p>\n illegal activities and\/or fraudulent business transactions,<\/em><\/p>\n sales made by third parties or Entities conducting business in other industries<\/em><\/p>\n <\/em>Section 3.4 states:<\/strong><\/em><\/p>\n Merchants generally must not disclose Cardmember Information, nor use nor store it, other than to facilitate Transactions in accordance with the Agreement. Merchants must, and they must cause their Covered Parties, to:<\/em><\/p>\n store Cardmember Information only to facilitate Transactions in accordance with, and as required by, the Agreement<\/em><\/p>\n What Does This Mean?<\/strong><\/p>\n For a non-lawyer, I am pretty good at interpreting legalese, and this seems pretty clear cut to me.\u00a0\u00a0\u00a0 These companies are blatantly\u00a0 violating their merchant agreement with American Express and other credit card processors, and they have been doing so for a long time.\u00a0 According to Mark Ashley of the blog Upgrade Travel Better<\/a>, this has been going on since at least 2005. <\/a><\/p>\n My contact at American Express informed me that this issue had been addressed in a recent Senate hearing.\u00a0\u00a0 At that hearing, Professor Prentiss Cox, the author of the report on pre-acquired in the Harvard Journal on Legislation<\/a> presented the case against pre-acquired account marketing.\u00a0\u00a0\u00a0 You can read his testimony here<\/a>, which is very similar to his journal article that I summarized in Part Two of this series<\/a>.\u00a0\u00a0\u00a0\u00a0 Another witness was Ben Edelman, an assistant professor at the Harvard Business School in the Negotiation, Organizations & Markets unit. \u00a0\u00a0 You can read his statement for the record <\/a>and refer to his website <\/a>has a wealth of information about this subject.<\/p>\n On his website, he reaches the same conclusion that these companies are violating their merchant agreement with American Express:<\/p>\n American Express’s Merchant Reference Guide<\/a> prohibits the automatic transfer of customers’ card numbers. American Express rules provide that “Merchants … must not disclose<\/strong> Cardmember Information… other than to facilitate Transactions<\/strong> in accordance with the Agreement” (p.7<\/a>) (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<\/strong> … ask the Cardmember<\/strong> to provide: … Card Number” (p.12<\/a>) (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.<\/em><\/p>\n I never received a direct answer addressing how corporations can get away with violating their merchant agreement, but perhaps Professor Edelman will.\u00a0\u00a0\u00a0 He wrote a letter to American Express’s Executive Vice President and General Council,<\/a> stating, in part;<\/p>\n
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\nFinally, Section 8.3 states:<\/strong><\/p>\n