Consumer Fraud: A Pandora’s Box of Troubles

Posted on 11/19/2013 by | AARP Tennessee | Comments

 

A Pandora’s Box of Troubles

In Greek mythology, Pandora was warned not to open a box, but she disobeyed and opened it anyway.  The box contained disease, sickness, hate, envy, and bad things people had never before experienced. Pandora tried to close the lid, but all the bad things were already out of the box and into the world.

Consumer fraud was not mentioned, but it might well have come from the box.  This month we have a collection of bad acts that are new to the world. 

The shut-down of the federal government means that some of the most powerful consumer protection agencies were not on guard this month.  Fortunately, state enforcement agencies were still active.

Jury Duty Scam

            A new scam surfaced in Rhode Island, where people were threatened with arrest for allegedly failing to appear for jury duty  They then were offered the chance to “post bail” by paying money with a credit card.  The calls came from a person who claimed to be from a county sheriff’s office and who had personal information about the individuals.  The victims told the Office of the Rhode Island Attorney General that the caller was aggressive and threatened them when questioned about the claims, saying that the victims would be arrested at their homes if they did not pay.

            The Attorney General of Rhode Island urged residents who receive this type of threat to hang up, and then call the local police to report the incident as quickly as possible.  Give the police the name and telephone number of the person calling and who they claim they work for.  The information the scammer claimed to have very likely came from information that is readily available on the internet.

Deceptive Advertising by Discount Clubs

            Affinion and two of its subsidiaries, Trilegiant and Webloyalty, run multiple discount clubs and membership programs offering services such as credit monitoring, roadside assistance, and discounted travel. The District of Columbia and 45 states recently sued them, alleging that the companies misled consumers into signing up and paying for discount clubs and memberships.

Affinion markets its programs through agreements with “marketing partners,” which include well-known banks and retailers.  The programs are presented to consumers, often after transactions with the partners, through direct mail, online, telemarketing, and face-to-face transactions.  Consumers are charged a monthly fee that continues until the consumers affirmatively cancel the services.

Consumers complained that they were charged for services without their authorization or knowledge.  In some cases, once they learned they were being charged, consumers claimed that they had trouble canceling or getting a refund.  Other consumers said they were confused about who Affinion was, because the offers appeared to have come from the marketing partners with whom they had done business.

Two marketing practices used by Affinion were particularly troubling.  In the first practice, consumers were sent what appeared to be a check. If they endorsed and deposited the check, they unknowingly “authorized” their enrollment in Affinion’s membership programs and unintentionally agreed to be billed each month indefinitely.

In the second practice, consumers were presented an offer immediately after an online purchase from a retailer who was an Affinion marketing partner.  Affinion thus was able to enroll and bill consumers without acquiring any of their account information from the consumer, because the marketing partners passed that information on to Affinion.

The companies settled with the states and the District of Columbia, agreeing to pay a total of more than $30 million.  The agreement also required Affinion to provide clear and conspicuous information to consumers after enrollment regarding their membership, periodic reminders of their enrollment, and changes to its cancellation practices.

More information can be found at:

 http://njtoday.net/2013/10/10/new-jersey-joins-multi-state-settlement-resolving-allegations-of-deceptive-advertising-by-discount-clubs/#ixzz2hu58YSow

Fake Reviews

            The Attorney General of New York recently took action to halt deceptive reviews on the internet.  19 companies agreed to cease their misleading practices and pay a total of $350,000 in penalties.   The companies included a charter bus operator, a teeth-whitening service, a laser hair-removal chain, and an adult entertainment club, as well as firms that were paid to enhance reputations by placing fraudulent reviews on sites such as Google, Yelp, Citysearch, and Yahoo!

While the public may suspect that some restaurants and hotels hype their own reviews, the potential damage suffered could be minimal.  However, the phony reviews that were investigated included those of dentists, lawyers, and an ultrasound clinic, where the impact of false information could be more significant.

The New York Times, which reported the investigation, quoted Aaron Schur, senior litigation counsel for Yelp, as saying “This shows that fake reviews are a legitimate target of law enforcement.”  According to the newspaper, Yelp has taken an aggressive approach regarding reviews that it believes to be false and has sued a California law firm for writing fake reviews of itself.

contribution by Alan L. Marx, AARP Volunteer