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Class Claims Chase Bank & 1-800-Flowers|Assist in ‘Insidious’ Online RICO Scheme

BROOKLYN (CN) - Chase Bank and 1-800-Flowers.com provide essential services for an online racketeering scheme run by a "discount club" whose "insidious set of business practices" have been exposed by Congress, a class action claims in Federal Court. Trilegiant and its corporate parent Affinion "defraud the consumer into paying fees" to "clubs" such as Great Fun and LiveWell "that consumer[s] never even realized they had signed up for," according to the complaint.

"In reality, Trilegiant has developed an insidious set of business practices intended to create consumer confusion and to ultimately defraud the consumer into paying fees to such 'clubs' that consumer never even realized they had signed up for," the complaint states.

"Trilegiant's actions have been subject to congressional hearings and prior governmental investigations. Its business practices are well known to the Internet merchant community and to the credit card companies, each of whom is an essential part of Trilegiant's fraudulent scheme. Yet the Trilegiant Enterprise has continued to function undaunted by all of this adverse attention: e-merchants such as 1-800-Flowers continue to receive revenue from their participation in Trilegiant's scheme, and the credit card companies such as Chase continue to process charges from Trilegiant despite explicit knowledge of Trilegiant's fraudulent business practices. Without any of the three corners of this triangle of fraud, the enterprise would fail and the fraudulent scheme would collapse."

The class claims Trilegiant's scheme has five steps: paying fees to e-merchants to get access to customers' checkout process; luring consumers with "post-transaction offers" of membership, promising free gifts and cash back; obtaining credit card information through unauthorized "data pass" arrangements; charging up to $39.99 a month through "negative option billing"; and using "various tactics" to avoid crediting back customer's accounts through "refund mitigation."

The complaint cites two U.S. Senate Committee reports: "Aggressive Sales Tactics on the Internet and Their Impact on American Consumers," of Nov. 16, 2009, which "concluded that: '[Trilegiant/]Affinion ... use aggressive sales tactics intentionally designed to mislead online shoppers. [Trilegiant/Affinion] exploit shoppers' expectations about the online purchasing process to charge millions of consumers each year for services the consumers do not want and do not understand they have purchased. Hundreds of e-commerce merchants - including many of the best-known respected websites and retailers on the Internet [such as 1-800-Flowers] - allow these three companies to use aggressive sales tactics against their customers, and share in the revenues generated by these misleading tactics,'" according to the complaint. (All brackets as in complaint.)

The class claims the Senate Committee published a second, "Supplemental Report on Aggressive Sales Tactics on the Internet," on May 19, 2010, "that was based on information provided by e-merchants such as 1-800-Flowers. The Supplemental Report concluded that e-merchants such as 1-800-Flowers have engaged in deceptive conduct and have violated credit card company rules by automatically transferring customers' credit card information to Trilegiant/Affinion."

The complaint continues: "These new investigations follow on the heels of settlements Trilegiant reached with sixteen attorneys general in 2006 that required Trilegiant to cease certain business practices. But like a virus, Trilegiant has mutated its business practices into their current form, which have given rise to these new investigations and to this class action lawsuit.

"As a result of Defendants' fraudulent marketing scheme, plaintiff and members of the putative class have been charged for 'memberships' to Trilegiant 'clubs' that they never wanted or used, and which 'clubs' have little or no actual value.

The complaint adds: "These fees paid to e-merchants can be quite substantial - congressional records indicate that classmates.com was paid in excess of $70 million from Trilegiant."

The class seeks restitution and punitive damages. Its lead counsel is Robert Axelrod with Pomerantz Haudek Grossman & Gross.

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