Webloyalty Customers Eligible for Payments Under Class-Action Settlement

Back in 2007, Xconomy ran a story by freelance contributor Seth Shulman about a class-action lawsuit unfolding against Norwalk, CT-based Webloyalty, an online marketing company. The comment section of that story became something of a clearinghouse for ongoing complaints against Webloyalty, which runs many of the discount programs pitched to consumers as they are finishing e-commerce transactions.

If you’ve ever bought a movie ticket online at Fandango or Movietickets.com and then been offered a $10 rebate, you might well have seen a Webloyalty offer. The problem—as scads of consumers alleged to Xconomy, the Connecticut Better Business Bureau, the New York Times, and other organizations—was that by accepting such rebate offers, many people unwittingly signed up for discount programs that carry a $10 monthly subscription price, fees that customers often didn’t notice on their credit card bills until months or years later.

Well, now there’s finally something for Webloyalty’s critics to be happy about. On June 30, a federal judge in Boston approved a settlement agreement in a class-action lawsuit alleging that Webloyalty broke state and federal laws by failing to disclose details such as the monthly charges. Webloyalty maintains that the details about its charges have always been clear in the fine print and in the follow-up e-mails it sends to subscribers, and it admitted no wrongdoing in the settlement. But under the terms of the settlement—which went into effect on August 14—the company agreed to change the way it markets its programs, and to partially or fully refund Webloyalty members for each program in which they were enrolled. (That includes programs known as Reservation Rewards, Shoppers Discounts & Rewards, Members Specials, Buyer Assurance, Distinctive Privileges, PC Protection Plus, Travel Values, Travel Values Plus, Classmates Rewards, and Wallet Shield.)

Up to 20 million people who joined Webloyalty’s programs between September 30, 2000, and September 30, 2008, will be eligible for the refunds, according to David George, a plaintiff’s attorney in the suit quoted in “The Haggler,” the New York Times’ consumer-protection column. If you’re one of these people, you can’t dally too long: members of the settlement class (meaning any U.S.-based Webloyalty subscriber who didn’t explicitly opt out of the settlement before May 29, 2009) must submit claim forms by January 11, 2010, to get their payments, according to this website created by Garden City Group, a Melville, NY, company that specializes in administering class-action settlements.

In comments to Xconomy, Beth Kitchener, Webloyalty’s vice president of corporate communications, said “we fully support the judge’s decision” to approve the settlement agreement. “Given that the settlement terms are consistent with our commitment to maintaining high standards in our marketing and customer service practices, we believed it to be in the best interests of our company, our clients and our members to resolve this matter and move forward,” Kitchener said.

It’s hard to gauge what material effect the settlement will ultimately have on Webloyalty. If all 20 million members of the settlement class were to apply for payments of $10 or $20, that could translate into a hit of $200 million to $400 million. But “the actual amount of payments is dependent on the number of members who file an eligible claim,” Kitchener points out. “We cannot speculate on what that number will be at this time.” She says the company is notifying eligible customers about the settlement terms via e-mail, hard-copy letters, and advertisements in USA Today.

Meanwhile, Movietickets.com, Orbitz, Hotels.com, and many other consumer websites continue to display the company’s rebate offers, earning them what Webloyalty calls post-transaction revenues every time someone signs up. Because the class-action suit ended in a settlement rather than a legal ruling, it didn’t ultimately lead to a clarification in the laws governing this kind of online marketing, as some observers had hoped it might. However, Webloyalty did agree in the settlement to a number of changes in the way it pitches and administers its discount programs.

One of the changes relates to what was probably Webloyalty’s most controversial practice: getting shoppers’ credit card numbers from the merchants where they had just made purchases rather than asking them to provide credit card information explicitly during the signup process. Many consumers complained that because Webloyalty never asked for their credit card numbers directly, they didn’t realize they were signing up for anything. In the settlement, Webloyalty agreed to require users to manually enter the last four digits of their credit card numbers before joining a discount program.

How Webloyalty Is Changing Its Marketing Offers Under the Settlement AgreementOther changes in Webloyalty’s marketing as a result of the settlement include making billing details plainer when customers are signing up to receive rebates, making it easier for customers to cancel their subscriptions, providing toll-free customer service numbers in all e-mails, and ridding offer pages and advertisements of words like “award” and “reward” that suggested to some that the discount programs were free of charge. (See the graphic at left for a complete rundown of the changes Webloyalty is making to its offer pages. Click on the graphic to see a larger version or click here to see a full-size version.) Webloyalty will also pay $2.7 million in attorney’s fees to the lawyers in the class action case.

Meanwhile, separate from the class-action settlement, West Virginia Senator Jay Rockefeller, chair of the Senate Commerce Committee, is leading what he calls an “e-commerce ‘mystery charges’ investigation” into the practices of Webloyalty and other discount-program providers such as Vertrue, which is also based in Norwalk, CT. In May, the committee requested documents from the companies regarding what Rockefeller’s office calls “unauthorized charges,” and in late July it subpoenaed Vertrue after the company allegedly refused to provide relevant papers. (Vertrue says that it requested the subpoena, and that it would not hand over private customer data without one.)

“People in West Virginia and across the country are struggling more than ever to keep up with their mortgages, bills and other financial obligations,” Rockefeller said in a statement on the Vertrue subpoena. “If online consumers are being charged without their knowledge for services they don’t want, that is extremely troubling to me and has to be stopped at any time—but especially in the midst of this difficult economic climate.”

But Webloyalty, for its part, seems to be seeking lessons from the experience of the class-action suit. “We make every effort to be straightforward in our offers, allowing consumers to make educated choices regarding the products and services they purchase,” Kitchener tells Xconomy. “The Internet is a dynamic medium and, as Internet marketers, we must and do constantly evolve our approaches based on the input we receive from clients, members and other interested parties.”

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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