Consumer Federation of California

Last month, the attorneys general of California and 15 other states
announced a $14.5 million settlement with marketing giant Trilegiant
and Chase Bank over charges that consumers were being duped into
signing up for a "purchase protection" program that can cost almost
$150 per year.

That settlement prohibited Trilegiant’s Buyers Advantage program from
offering a cash "reward" or "rebate" to lure people into enrolling, and
to "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."
Purchase protection plans like Buyers Advantage typically offer
extended warranties and guaranteed refunds if an identical product is
later found at a lower price.

So now, just a few weeks after the settlement was reached, Bank of
America credit card customers are receiving with their monthly
statements a pitch for Trilegiant’s plan that doesn’t offer a reward or
rebate, but instead features a "$10 credit to your account."

Moreover, the fine print says that "unless I call during my one-month,
risk-free introductory period, my membership will be automatically
extended for an additional 11 months at the $139.99 first year’s
membership fee."

It continues: "My membership will be automatically renewed at the
$149.99 annual membership for the second year, and renewed at the
then-current fee for each year thereafter."
Trilegiant says the pitch complies with the terms of the settlement.
But consumer advocates — along with the California attorney general’s
office — aren’t so sure.
"They’re using identical tactics but slightly different language to
rope in consumers," said Joe Ridout, a spokesman for San Francisco’s
Consumer Action.

"This doesn’t sound like what the attorneys general
had in mind."
Benjamin Diehl, a deputy attorney general, said his office needs to
"sit down and review this solicitation with a fine-tooth comb to make
sure it’s in compliance with the settlement."
He said the language and presentation of the pitch must be in keeping
with both the letter and spirit of last month’s agreement.

"Any solicitation that fails to adequately communicate the
ramifications of the offer does not live up to the spirit of the
settlement," Diehl said. "We need to determine if this is so."
Under new ownership

Trilegiant is based in Connecticut and was a division of former
franchising heavyweight Cendant, which now focuses on its Avis and
Budget rent-a-car brands under the corporate name of Avis Budget Group.

Trilegiant was sold to investment firm Apollo Management in 2005.

It
was subsequently rechristened Affinion, although, confusingly, the
Trilegiant name is still also used (as is the case with the Buyers
Advantage solicitation sent to BofA customers).
Along with Buyers Advantage, the company says, it offers a variety of
other "membership" services through numerous partners, "including 18 of
the top 20 financial institutions in the country."
Todd Smith, an Affinion spokesman, said the company’s pitch to BofA
customers "is in line with what was agreed to in the settlement" and
contains "full disclosure of terms."

"This underscores our corporate mission, which is to be at the forefront of customer satisfaction," he said.

The Affinion Web site (www.affinion.com) says Buyers Advantage includes
extended warranties, discounts on repairs, guaranteed returns of
unwanted products, and refunds in the event that an identical product
is found at a lower price within 60 days of purchase.

Ridout at Consumer Action said such purchase-protection programs are seldom worth the money they cost.

"Typically, you end up paying more in annual fees than you get back in rewards," he observed.

Business opportunity

But those fees represent a significant business opportunity for
companies like Bank of America that partner with Affinion to offer
Buyers Advantage and similar programs.
"Would you like to create a significant and recurring revenue stream,
with virtually no cost or risk to your current business?"

Affinion’s
Web site asks potential partners.
"We can create an innovative, recurring revenue stream for your
business by offering your current customers a high-quality membership
product that complements — but doesn’t compete with — your current
product offerings."

According to the Connecticut Better Business Bureau,
Affinion/Trilegiant has "an unsatisfactory record with the bureau due
to unanswered complaints and a pattern of complaints concerning
deceptive selling practices, unauthorized charges to consumers’ credit
cards, and non-cancellation of memberships following cancellation
requests."

In filing suit against Trilegiant in 2005, then-California Attorney
General Bill Lockyer said the company "preyed on vulnerable senior
citizens and consumers who read and speak limited English."
"After tricking victims into joining these membership programs, the
defendants used deceptive billing practices to maintain their
ill-gotten income stream," he said.

The complaint focused on Trilegiant programs offered through Chase. It
noted that "Chase receives substantial compensation for its
participation in this marketing scheme, including commissions on
initial sales and automatic renewals of Trilegiant’s products and
services."

A Chase spokesman said the company still has a relationship with
Trilegiant but has changed its marketing pitches "to use more clear and
conspicuous language."
For its part, BofA says it doesn’t use a tactic previously employed by
Trilegiant — enclosing a check with the solicitation that, if cashed,
enrolls you in Buyers Advantage.

Purchase-protection plan

The pitch received this month by BofA customers says that if you want
$10 credited to your account, you must fill out the enclosed insert and
send it back to the bank.
But it may not be clear to some that it’s an application form for a
purchase-protection plan. "Claim a $10 Credit to Your Account," the
insert says in large letters in a bright red box.

Everything else is in smaller print, including acknowledgment that
filling out the form constitutes enrollment in Buyers Advantage as well
as a host of areas — including cars, computer software, CDs and
"products for commercial use" — that aren’t covered by aspects of the
program.
Betsy Weinberger, a BofA spokeswoman, said the bank is comfortable with how the Buyers Advantage pitch communicates its terms.

"We believe that customers have an informed understanding of the product," she said.

But Richard Holober, executive director of the Consumer Federation of California,
said this latest Trilegiant offer is fundamentally no different from
the earlier pitches that led state attorneys general to take action.
"No bank or credit card company should be in bed with a company like this," he said.