Once Upon a Time I Could Charge Your Credit Card Using Your Email

Ok so I can’t, but apparently some web loyalty firms are able to. Some at least are starting to change their business model as pressure mounts from Congress due to consumer complaints. As of January 8th, 2010, your 16 digit credit card number is now required to enroll in loyalty programs from Affinion or so says a press release from U.S. Senate Committee on Commerce, Science, and Transportation.

Why is that news? Previously loyalty programs like Affinion and Vertrue, Webloyalty, etc only needed your email address to charge a subscription to your credit card through the post-transaction pages of retailers such as Priceline, VistaPrint, Intelius, Buy.com and others. Called post-transaction marketing it is a way for loyalty programs to get consumers to agree to offers that appeared free but usually were tied to monthly subscriptions. Often the consumer would unknowingly “opt-in” to being charged by checking a box at the end of the shopping cart process. That’s when the retailer would pass the card information and subscription “request” to the loyalty program.

In a related article on Dow Jones, both Vertrue and Webloyalty admit they exceed the law’s requirements by increasing enrollment requirements in their programs in order to charge users – from just an email (early last year) to an email and the last 4 digits of your credit card (late last year).

Yes, you heard that right, as recently as of last November, as I was writing about the offers and scams, loyalty programs were exploiting their own version, and were helping firms rake in millions by charging users $10 to $20 a month for subscriptions they ‘agreed to’ without entering their credit card numbers. I mentioned the $1.4 billion extracted by these loyalty systems before, keeping up on the issue really shows how tricky, persuasive, and well engineering these programs are. Per the Senate document (pdf), approximately 30 to 35 million users were entangled into these schemes, or roughly the equivalent of 1 in every 10 Americans was suckered into these programs.

So, the basic math around this is as follows:

• $1.4 billion in receipts
• 30 million users affected minimum
• approximately $46 per person went to these programs.

Since the amount of post-sale transactions typically fell in the $10 to $20 range, that means on average, users paid into these programs for  2 to 5 months.

There are some lessons that I’ve extracted from learning about this, and maybe one of them will helpful.

1. You can be charged by just entering your email into a post-transaction offer. It’s legal, and it’s been happening for a while.
2. Read the fine print,  better yet, exercise extreme caution when presented by a post-transaction offer. I’ll skip/cancel them all myself, thank you.
3. Check your credit card statements religiously, since #1 (above) is not illegal, you can and may be charged at anytime.

But even as you try to protect yourselves, be aware that the post-transaction marketing firms are lobbying congress to protect their industry and maintain their wealth-building status quo. At stake are over $1B in revenue, and the senate report lists 19 companies making over $10 million and another 72 making over $1 million.  Money that comes from the pockets of you and I.