State Sues Over Memberships
State Atty. Gen. Bill Lockyer is suing units of Cendant Corp. and JPMorgan Chase & Co. for allegedly using deceptive promotions and billing practices to lure thousands of Californians into buying memberships in discount purchasing programs.
The programs, which offered discounts on services such as home repair and travel, were marketed through “reward checks” purportedly given to valued customers of Chase Bank USA and Chase Mortgage Corp., according to the complaint filed Tuesday in San Diego County Superior Court.
However, cashing the checks, which ranged from $2.50 to $10, would automatically enroll consumers in a trial membership for a service that cost $69.99 to $119.88 annually. If the consumer didn’t cancel within a set period -- usually 30 days -- he would be charged the annual membership fee, the suit said.
That fee was often described simply as an “optional service” on bank card and mortgage statements, the suit said. It would continue to be charged, year after year, unless the consumer canceled, the suit said.
The marketers targeted the elderly and people with limited command of English, Lockyer said in a statement.
“After tricking victims into joining these membership programs, the defendants used deceptive billing practices to maintain their ill-gotten income stream,” Lockyer said in a statement.
The lawsuit seeks restitution for the victims; a civil penalty of $2,500 for each unlawful act; an additional $2,500 for each violation involving a senior citizen; and a court order barring the defendants from engaging in the alleged practices.
Lockyer spokesman Tom Dresslar estimated that consumers paid more than $28 million for the deceptively advertised products. The suit doesn’t quantify the number of victims, but Lockyer’s office said the total was in “the tens of thousands.”
The membership programs were marketed by Trilegiant Corp., which paid a fee to Chase for providing access to its customers and for mailing Trilegiant’s pitch in Chase envelopes, leading buyers to believe they were dealing with their bank or mortgage company, according to the suit. Trilegiant, a subsidiary of New York-based Cendant Corp., is a global marketing company based in Norwalk, Conn.
A spokesman for New York-based Chase Bank said the company had not reviewed the suit and couldn’t comment. A Trilegiant spokesman called the allegations “unfounded.”
“We believe our companies’ marketing campaigns comply with applicable state laws by clearly disclosing the terms of the offers in all consumer solicitations, including those at issue in the lawsuit,” said Todd Smith, a Trilegiant spokesman.
