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How much disclosure is enough online? Congress has issued a subpoena to online marketer Vertrue for making unauthorized credit card charges online, and regardless of how it turns out, the increased exposure should prove bad for the business of blind credit card transactions.
The request by the Senate marks the Commerce Committee's first major subpeona to get documents from a private company since the 2002 Enron scandal.
Committee Chairman John Rockefeller wrote in a July 28 letter to Vertrue Chief Executive Gary Johnson that consumers are struggling to get by during the recession, and "allegations that your company is making this situation worse by charging consumers for services they do not want or use are extremely troubling."
Vertrue maintains that it has not done anything unlawful. And said that it requested the subpoena because the Senate was asking for information that could "include personally identifiable information about the consumer." Meanwhile, Vertrue has failed to disclose email, financial documents and other internal communications and has been accused of "slow walking" the investigation.
Companies like Vertue, WebLoyalty and Affinion run "web loyalty" programs that offer "cash-back" and coupon offers to consumers. Many consumers have complained that these practices are abusive, since their ads automatically cull consumers' credit card information when the customer provides an email addresses and clicks yes on loyalty program ads. They then proceed to charge a monthly fee — often $9 to $12 a month — unless the customer cancels the online membership service.
Brian Hoyt, an Orbitz spokesman tells CNET: "Consumers find this of value otherwise we wouldn't have it on the site. We're not in the business of misleading consumers."
But it's not immediately clear to consumers that publishers give away their credit card info in this manner.
On the Buy.com website, the privacy disclosure reads as follows: "Except as limited below, we reserve the right to use or disclose your personally identifiable information for business reasons in whatever manner desired." Down below, the policy states: "your Personally Identifiable Information is shared with BuyServices and our other third-party fulfillment partners and service providers, and with certain other merchants on our site."
But is issuing a disclaimer in fine print enough to guard these companies against culpability? Many don't think so.
"At the end of the day, a consumer should be allowed to do whatever they want with their data," says Joe Broumand, CEO of Opt-Intelligence, Inc. "Companies should be upfront about what they're doing."
And the number of complaints about this type of practice are piling up. Class action lawsuits have been filed against both Vertrue and WebLoyalty. Last year, the Better Business Bureau said it had received nearly 1,800 complaints about Affinion.
The problem is that methods like this make money," says Jerry Doyle, CEO of Perspective: "From a profit standpoint, it's a pretty good business to be in — short term."
But the growing number of complaints are going to lead to bad blood. And for the retailers who work with these marketers, that could be very bad for business.
"I would imagine that any time you frustrate a consumer, it's not good for your brand," says Doyle. "Something like this is hurting the industry, because responsible companies get tainted with the same brush."