By Kim Hart - 11/17/09 09:08 PM EST
Jay Rockefeller (D-W.Va) has spent much of the past hour describing
his disdain for third-party companies that make deals with e-commerce
sites and acquire unwitting consumers' credit card information through
what he calls misleading sales pitches.
He called the practice "un-American." Sen. Byron Dorgan (D-ND) said it sounds like fraud.
The sales pitches happen like this: When a consumer is completing an online purchase, third-party companies insert a sales offer, usually for cash-back rewards or coupons, in a way that makes consumers think they are agreeing to something related to the transaction. Many times, consumers are unaware they have signed up for "loyalty programs" that then charge their credit cards $10 or $20 dollars a month, often going unnoticed on credit card bills.
"Claire McCaskill--one of our members--her mother got scammed and she is absolutely in a rage about it," Rockefeller said of his colleague, who did not attend the hearing.
Online retailers including Buy.com, 1-800-FLOWERS.com, Classmates.com, USAirways.com and MovieTickets.com, have made more than $10 million from these types of arrangements, according to the report issued today by the Senate Commerce Committee staff.
Florencia Marotta-Wurgler, assistant professor at New York University Law School, said these companies disclose the terms of the agreements in very fine print, which no one reads. In her research, she found that only one or two out of every 1,000 shoppers chose to read the fine print of an online contract.
"Fine print is just the greatest scam of all time," Rockefeller said.
E-commerce sites shouldn't be able to sell account information to third-parties, said Prentiss Cox, professor at University of Minnesota Law School.
The committee plans to alert the Federal Trade Commission and attorneys general of these tactics.