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(SAN DIEGO) – Attorney General Bill Lockyer today announced a $14.5 million, 16-state settlement with Chase Bank and Trilegiant Corp. that will resolve allegations the companies unlawfully deceived consumers into paying for membership programs that purportedly provided discounts on car and home repair, shopping, and other goods and services.
“Many victims of this deceptive scheme were vulnerable senior citizens and consumers who read and speak limited English,” said Lockyer. “This settlement will make them whole, as well as all other customers the defendants unlawfully misled. Equally important, the settlement imposes business reforms to prevent future abuses and protect consumers.”
The settlement requires Trilegiant to pay a combined $8.325 million in restitution to consumers in California and the other 15 states. Eligible consumers will include those who either already have complained to Trilegiant or their Attorney General, or who complain in writing within the next nine months. Californians comprise roughly 30 percent of the customers charged for memberships in the states which settled with Trilegiant and Chase.
Trilegiant and Chase also will pay $6.175 million to the settling states to cover civil penalties and recoupment of costs and fees. Trilegiant will pay $572,539 to California, including about $229,000 in civil penalties, and Chase will pay California $350,000, including $175,000 in civil penalties.
In California, the settlement resolves a lawsuit Lockyer filed in July 2005 in San Diego County Superior Court. Lockyer filed the settlement in the same court. The lawsuit alleged Chase and Trilegiant solicited consumers with offers of “free” trials in membership programs, without adequately informing consumers they would be charged automatically if they did not affirmatively cancel within a specified period of time.
The solicitations often included a check for a small amount of money, between $2 and $10, which consumers often thought were rebates or rewards. However, by cashing the check, consumers purportedly agreed to pay for the membership program after the trial offer ended, according to the complaint. The solicitations often were included in consumers’ mortgage or credit card statements, the complaint alleged, or on the letterhead of companies from which consumers already had purchased products. This tactic prevented consumers from realizing the solicitations were in fact sent by Trilegiant.
If consumers did not affirmatively cancel within the required time, Trilegiant automatically billed the membership fees to consumers’ credit card or loan statement on either a monthly or yearly basis, according to the complaint. Trilegiant then charged consumers repeatedly until they cancelled their membership. Many consumers belatedly discovered they unwittingly had purchased memberships in several different clubs, the complaint alleged.
The membership programs include: AutoVantage, AutoVantage Gold, Buyers Advantage, CompleteHome Service, Just for Me, Pet Privileges, Shoppers Advantage and Travelers Advantage.
Regarding Chase’s role in the alleged unlawful business practices, Chase and Trilegiant entered agreements under which Trilegiant gained access to Chase’s customers for the purpose of marketing the membership programs. In soliciting Chase customers, Trilegiant used Chase’s name, and Chase reviewed and approved marketing materials used by Trilegiant, according to Lockyer’s complaint.
To protect consumers from unlawful deception in the future, the settlement requires reforms of Trilegiant’s and Chase’s business practices. Future solicitations sent by Trilegiant, or any other company that solicits Chase customers in a similar manner, must clearly disclose all terms of any “free trial,” including when and how the customer will be billed for any membership, and how to cancel a membership. Additionally, the settlement forbids Chase and Trilegiant from engaging in any deceptive conduct in the marketing of membership programs. The prohibited practices include identifying the solicitation as a “reward” or “rebate” offer, or telling consumers that any check or other premium offered as part of a solicitation is anything other than a benefit or incentive for the purchase of a membership.
Consumers who signed up for membership in a Trilegiant club through any bank or other company they did business with, and who were first charged membership fees on or after July 1, 2001, are eligible to receive restitution. Additionally, Trilegiant is required to send renewal notices to consumers who have active memberships advising them that they have purchased the membership and how to cancel the membership if they wish. If there are not enough funds to make full restitution to all consumers who complain, then those consumers who complain over the next ninth months will get a pro rata share. All consumers who already have complained will receive full restitution.
In addition to Lockyer, the Attorneys General of the following states joined the settlement: Alaska, Connecticut, Illinois, Iowa, Maine, Michigan, Missouri, New Jersey, North Carolina, Ohio (Trilegiant only), Oregon, Pennsylvania, Tennessee, Vermont and Washington. Louisiana today was expected to announce a separate settlement only with Trilegiant.
Consumers who are trying to find out if they unknowingly paid for a membership program should carefully examine their credit card or mortgage statements. They can also contract Trilegiant electronically at www.trilegiant.com or by mail at Trilegiant Corporation, 100 Connecticut Avenue, Norwalk, CT 06850, ATTN: K. Buonagurato. They also should monitor their mail for any notices from Trilegiant. Written complaints requesting restitution for unauthorized charges can be submitted to the Public Inquiry Unit of the Attorney General’s Office at P.O. Box 944255, Sacramento, CA 94244-2550 or by e-mail at http://ag.ca.gov/contact/complaint_form.php?cmplt=CL .