New York Attorney General Obtains $10 Million Settlement against Online Discount Programs and Participating Retailers

The New York Attorney General announced the settlement of consumer fraud complaints stemming from online discount or “Web loyalty” programs. The settlement includes a group of online retailers and service providers who offered the programs on their Web sites, as well as the third-party marketers who provided the so-called Web loyalty programs. According to the New York Attorney General's press release announcing the settlement, consumers were presented with a cash back or discount offer from the third-party marketer when completing an online transaction, but information about the terms of the offer, including the fact that their credit cards would be charged a recurring fee, "was buried in fine print and cluttered text," as was the fact that their credit card information, already provided to the retailer, would be passed through to the program provider. The Attorney General stated that because "consumers were not required to provide their financial information as part of the enrollment process, they often accepted the offer without knowing they were joining a fee-based program." Among other things, the retailers and service providers agreed to permanently end the practice of "data pass," i.e., providing customer credit card and other payment information to online discount programs.

New York Attorney General Press Release (Aug. 18, 2010) Download PDF

Editor’s Note: Online loyalty and rewards programs have been the subject of Congressional hearings. See, e.g., the May 2010 Majority Staff Report of the Senate Committe on Commerce, Science and Transportation, on "Aggressive Sales Tactics on the Internet," available here. In June, Senator Rockefeller introduced the Restore Online Shoppers’ Confidence Act to address improper practices in online rewards programs. See also the rulings In re EasySaver Rewards Litigation and Bott v. VistaPrint USA discussed below.