Scrutiny of post-transaction marketing and related data pass practices continues at the federal and state levels. These practices typically involve an online merchant passing consumer billing information from a merchant’s account record to a third party. Consumers provide their credit card account information in the course of a transaction with a merchant. Prior to “check-out,” or shortly thereafter, the consumer is offered another product or service from a third party. If the consumer accepts the offer, the third party obtains the account information from the original merchant and bills the consumer directly, without the consumer reentering the information.

As discussed in the November issue of The Download, the Senate Committee on Commerce, Science and Transportation (the “Committee”) held a hearing and released a staff report on November 17, 2009, examining the impact of these online sales practices on consumers. Three companies that have been a focus of the Committee investigation – Affinion Group, Webloyalty Inc., and Vertrue Inc. – announced in January 2010 that they will discontinue data pass practices and will ask consumers for 16-digit credit card account numbers to enroll in membership programs online. Nevertheless, Chairman Rockefeller (D-WV) has stated that his Committee’s investigation will continue. No federal legislation has yet been introduced.

New York Attorney General Andrew Cuomo has also launched an investigation of 22 online merchants that partner with third parties to present incentive offers that are completed through data passes of credit card information. On January 27, 2010, Attorney General Cuomo announced that his office had reached an agreement with online ticket seller Among other steps, Fandango agreed to pay $400,000 into a consumer redress fund and to cease data pass practices that sent credit and debit account information to third parties. Attorney General Cuomo had previously intervened in a lawsuit against Webloyalty, seeking access to larger refunds for plaintiff consumers.