Iowa cracks down on Ben Stein’s sleazy paymasters
Ben Stein has a bit of free time on his hands these days, now that his odorous association with FreeScore.com and its sleazy owners Vertrue means that he’s no longer writing a column for the NYT. So he might be interested in reading the blistering 62-page ruling that Judge Robert Hutchison has just handed down in Iowa, which goes into great detail about how Vertrue has violated all manner of laws in that state with its unfair and deceptive practices.
Here’s the bit about Ben Stein’s arm of the company:
Vertrue maintains its own website FreeScore.com, where the consumers can purchase a service involving credit scores. However, Vertrue bundles another distinct product, Privacy Plus, with the purchase of the initial service, for an additional monthly fee of $1.00. Thus, to purchase the initial service, a consumer must purchase Privacy Plus, although this fact is obscured as much as possible. In such instances, although the record is unclear as to whether a consumer receives one welcome e-mail for both services or two separate e-mails for the two distinct services, there is no ambiguity that to cancel both services, a member must call two separate 800 numbers, even though the consumer had no choice but to purchase both services together. Most consumers will likely be unaware of the purchase of the second service (much like the post-transaction solicitations discussed above), and that when the consumer calls an 800 number to cancel the primary service, he or she will continue to be billed for the (unknown) add-on service. Moreover, even for the wary consumer that understands that two services are being purchased with only one click of the mouse, such a consumer may not understand that calling one number to cancel does not cancel both services, despite the “one-click” nature of the initial purchase.
And the rest of Vertrue is even worse: Hutchison goes into great detail about how it preys on the elderly, almost never provides any benefits to the users of its products, and goes to great lengths to create bogus “surveys” and the like, the results of which are always discarded unread, to make people think that they’re being rewarded for doing something. He writes:
Unlike Vertrue‘s memberships, most consumer goods are tangible. Thus, for example, if a membership arrangement involves the periodic review of books or CDs on a negative option basis, the receipt of the items themselves serves as unequivocal notice to the consumer of the fact of membership and its attendant obligations.
By contrast, a membership that provides “access” to benefits may be all but invisible and may have little concrete presence in a consumer‘s life, especially in instances where the consumer is not even aware of purchasing the “access” in the first instance. Here Vertrue fosters invisibility by utilizing a marketing structure that obscures effective notice to the consumer of the membership enrollment and places numerous burdens on the consumer: the burden to cancel in order to avoid the onset of charges; the burden to differentiate a membership notice from the junk mail or spam that it resembles; and the burden to detect an ambiguous charge on one‘s account statement and act on it. Vertrue‘s own records show that 84% of the more than 860,000 Iowa memberships involved no discernible use whatsoever of any membership benefits by the consumers who were subject to membership charges. Thus, the Defendants‘ overall marketing scheme has netted more than $35 million in membership charges from Iowans, and has provided remarkably little in return. Indeed, Vertrue‘s own benefit usage data for memberships that began after 1989 and were active as of May of 2009 shows that 91.5% of memberships involved no benefit usage whatsoever.
I look forward to Vertrue being slapped with a massive fine in Iowa, and to the authorities in 49 other states following suit. Sadly I doubt Ben Stein can be held personally liable for any of this, but he’s certainly morally culpable. And next time he cashes a check from Vertrue, he should think about the story of Charles Pope:
Charles Pope, a 63-year-old military veteran from Marshalltown, testified at trial regarding his experience with a check mailer. Mr. Pope‘s experience appears to be representative, and well illustrates the objectionable features of Vertrue‘s method of marketing in the direct mail channel.
Mr. Pope received a mailing in the form of a “snap-pack,” a check-sized envelope that is to be opened by tearing off a perforated stub at the end. The outside of the snap- pack bore the name and the logo of the consumer‘s credit card issuer (“Union Plus” in Mr. Pope‘s case), and also bore the words “CHECK ENCLOSED” above Pope‘s name and address. The envelope contained a $10 check made out to Mr. Pope. The envelope also contained a check-sized slip of paper, which explained in small print that by cashing or depositing the check the consumer would be enrolling in a trial membership, which would lead to charges on the consumer‘s bank (or credit) account unless the consumer affirmatively canceled…
Vertrue‘s billing records showed that Mr. Pope‘s Union Plus credit card was charged $12.95 a month beginning in October of 2004, and the monthly charges continued through September of 2008, by which time the charge had risen to $14.95. Mr. Pope testified that he was not aware that he was a member of any Vertrue program until he was contacted by the Attorney General‘s office in about September of 2008, at which time he canceled the membership. He recalled receiving the check in the mail, but had assumed that he was being reimbursed for overpaying his credit card account. Mr. Pope testified that he never intentionally enrolled, and never made any use of whatever benefits the membership involved. Mr. Pope testified that he had seen the charges on his statement, but mistakenly believed that they related to insurance. By the time he canceled after four years, Mr. Pope had unwittingly paid $695.60 in membership fees. Upon cancellation, he was refunded only one payment of $14.95.
I wonder whether Stein feels like paying Mr Pope the other $680.65 out of his own pocket.