Visa tackles deceptive online 'data pass' marketing
Customers now have to enter card data twice if an external product is offered
By Tyler Metzger
In an effort to tone down aggressive sales tactics used by some Internet-based businesses, Visa Inc. announced plans Tuesday requiring its merchants to more actively warn their customers of external offers made during online transactions.
The company specifically seeks to restrict a practice known as "data pass," which occurs when a merchant offers a third-party product or service to a consumer before the transaction is complete. Many consumers don't know the offer is from a different retailer and end up signing up for an outside product, which often comes with unexpected monthly membership fees or recurring charges.
Consumers who shop online using their Visa cards should be confident that they will only be charged for the products and services they legitimately intend to purchase -- not those that are foisted on them through deceptive data pass schemes.
|-- Martin Elliot
Visa senior business leader
To tackle these aggressive and potentially deceptive sales tactics, merchants that use Visa will now require consumers to re-enter their credit card information if they want to purchase a subsequent third-party product or service. The company hopes the additional step will provide a clear signal to cardholders that a second purchase is about to begin.
"Visa's priority is protecting our cardholders and the integrity of the electronic payments system," Martin Elliot, a senior business leader for Visa, said in a press release. "Consumers who shop online using their Visa cards should be confident that they will only be charged for the products and services they legitimately intend to purchase -- not those that are foisted on them through deceptive data pass schemes."
The card processing giant's rules already forbid merchants from sharing a cardholder's account number or other sensitive information with anyone not directly involved in the transaction, but those guidelines don't prevent merchants from pairing up with other companies offering products, even if they are offered sometime during the transaction process.
According to a 2009 U.S. Senate report, three Connecticut-based companies -- Affinion, Verture and Webloyalty -- and their partner websites have generated more than $1.4 billion in revenue by employing the data pass practice. Additionally, more than 35 million consumers signed up for such services since 1999, and in 2009 alone, 4 million consumers were enrolled in their membership programs.
"I applaud Visa's decision to prohibit merchants from using 'data pass' marketing on its network," said Sen. John D. Rockefeller IV, the West Virginia Democrat who chairs the Senate's Committee on Commerce, Science, and Transportation. The committee's investigation "showed that this aggressive marketing practice enabled unscrupulous e-commerce companies to scam millions of American consumers out of more than $1 billion dollars. Our committee's investigation revealed how appalling this practice is and makes clear it should not be allowed -- I'm glad to see Visa has reached the same conclusion."
Prominent data pass partners
The Senate report also found that "more than 450 e-commerce websites and retailers" had partnered with the three Connecticut-based companies and have earned more than $792 million from the joint ventures. They included:
- Classmates Online
- Continental Airlines
- Pizza Hut
- Tiger Direct
- US Airways
- Vistaprint USA
Visa cardholders have the right to dispute purchases. If you feel you've signed up for one of these services unknowingly, report it to the Federal Trade Commission and contact your card issuer.
See related: Senate looking to crackdown on decpetive marketing practices, Phishing scams: What they are and how to prevent them, How to dispute a credit card bill with a merchant, 5 key federal laws help protect credit cardholders
Published: April 27, 2010
- CFPB sues tribal lenders, seeks refunds for customers – The Consumer Financial Protection Bureau has filed a lawsuit against four high-cost lenders owned by a California tribe, saying violations make the loans void ...
- Sweeping deregulation proposal targets the CFPB – A hearing in Congress showcased the Financial CHOICE Act, with proposals to strip the major powers of the Consumer Financial Protection Bureau ...
- Debt buyers may get exemption from collection rules – The U.S. Supreme Court heard arguments Tuesday on whether companies that buy debt should be exempt from consumer protections that apply to debt collectors ...