In a second major settlement with a post-transaction company, Webloyalty agreed to pay $5.2 million to the state of New York over charges that it enrolled consumers in discount programs after receiving their credit card information from online retailers. Five online retailers will also pay a total of more than $3 million.

New York Attorney General Andrew Cuomo recently settled with a Webloyalty rival, Affinion, for $8 million over claims that the company tricked consumers into signing up for discount clubs.

The settlements are a result of Cuomo’s “data pass” marketing investigation, where an online retailer transfers a customer’s credit card information to a third party like Webloyalty. After completing a transaction with an online retailer, consumers would be presented with a cash-back or discount offer from a marketing company. The AG’s office alleged that information about the offer and the fact that a consumer’s credit or debit card information would be transferred to a third party was buried in the fine print, and that consumers often accepted the offer without knowing they were joining a fee-based program. Webloyalty charged consumers between $9 and $20 each month, the AG’s office said.

Webloyalty will pay a total of $5.2 million under the settlement, which will refund consumer purchases and cover penalties, costs, and fees. In addition, the company agreed to permanently end its practice of obtaining consumers’ billing information from online partner retailers and reform its marketing practices to ensure that consumers understand the kind of program in which they enroll.

Webloyalty’s online retailer partners will pay a total of $3.3 million and also agreed to reform their marketing practices and refrain from providing their customers’ billing information to companies that market discount clubs online.

Along with the other major post-transaction companies Affinion and Vertrue, Webloyalty changed its practices earlier this year to require consumers to re-enter their credit card information to enroll in their discount clubs.

To read more details from the AG’s press release, click here.

Why it matters: In addition to the ongoing investigation in New York, data pass marketers are facing federal scrutiny as well. In May, Senator Jay Rockefeller (D-W.Va.), Chairman of the Commerce Committee, introduced the Restore Online Shoppers’ Confidence Act, legislation that would establish prohibitions and restrictions for all online post-transaction offers, and limit the use of “negative option” sales. The proposed legislation would impose a complete ban on the passage of data from one merchant to another in a post-transaction marketing sale. The post-transaction companies would be required to collect a consumer’s full information, rather than receiving it from the underlying seller. If enacted as drafted, the Restore Online Shoppers’ Confidence Act would have a profound effect on online marketers that currently pass or receive consumer data for post-transaction sales, and would have implications for all online services that periodically bill for their products or services. For more information on the Act, click here.