April 6, 2012 at 6:04 AM ET
Here’s a handy list of credit card charges that consumers have complained about during the first part of 2012. Do any of them appear on your credit card? Read on to find out why you should probably pull out your statements and check them.
There’s a steady stream of new and clever ways for frustrated consumers to find each other online, make collective noise and get satisfaction. Among the more intriguing is BillGuard.com, which does for your credit card bill what a spam filter does for your email.
Members sign up and let BillGuard scan their credit card statements for potentially fraudulent charges, billing errors or hidden, unexpected fees. The firm then asks consumers if they wish to tag the charge as suspicious. As soon as enough consumers say there’s a problem with a charge, all BillGuard members are warned and a suspicious-report web page is generated.
Founder Yaron Samid, a startup vet who was part of the team behind Register.com, said he got the idea for BillGuard after he nearly was taken in by an automated fee that appeared on his credit card bill.
“Two years ago, I found out I was paying $10 a month for a post-transaction coupon scam after my wife bought concert tickets,” he said “When I Googled the charge, I saw countless blog posts, complaint boards and tweets screaming about the same "hidden fee." Turns out millions were duped by the same scam and were complaining about it online and to their banks. So why wasn't I told?”
Samid and partner Raphael Ouzan, a financial data security expert, set out to build a system that would harness “collective consumer knowledge” and allow credit card users to share this kind of information with each other. BillGuard also monitors other complaint-related websites and social media services for signs that a company might be misbehaving.
Customer surveys show that about 90 percent of credit card users fail to scan their bills carefully each month, so a proactive alert system is essential, he said.
To see if the system really works, we asked Samid to share with us 10 potentially problematic charges that BillGuard warned consumers about in the first quarter of 2012.
Then we contacted the 10 companies involved to see if the warnings were warranted. We’re publishing 9 of the 10 here – the tenth requires additional investigation.
The list is varied, ranging from a small company that’s sending out $500 gift cards with a catch, to a magazine empire that’s generating complaints through the way it signs up new subscribers. Several themes run through the list, including the dreaded “negative option,” which relies on consumer laziness to pile on monthly charges, to the third-party “data pass,” which leaves many consumers wondering, “How did this company get my credit card number?”
BillGuard’s statements, and the company responses, are listed below. Next to each company name is the charge as it’s listed on most consumers’ credit card bills, which is clickable to BillGuard’s complaint page about the company. Check your credit card bills to see if any of these items appear, and consider disputing them.
BILLGUARD: “This hugely popular merchant was flagged by a user of ours who alerted us to their dubious usage of a negative-option membership model in order to charge you monthly. Upon your first purchase, ShoeDazzle “subscribes” you to their service. From that point on, you’ve agreed to be charged $39.95 every month unless you log into ShoeDazzle and click a “skip this month” link. Don’t “skip” in time, and you’re charged. In other words, you have to take action to avoid being charged. The terms and conditions explaining this subscription service are hidden at the bottom of the checkout screen in the fine print. Based on our findings and our users’ complaints about this unethical membership practice, we now propagate this information to our entire user base.”
RESPONSE: ShoeDazzle, which made a name for itself in part because of its affiliation with Kim Kardashian, says it no longer requires customers to subscribe to its service and no longer assesses a monthly charge. The firm announced the change in late March.
“Under the old model, we did communicate the process in a How It Works video, in Terms and Conditions, via email upon purchase, through our Client Service team,” said John Tabis, vice president of strategy at ShoeDazzle. He then invited us to forward any complaints that BillGuard received to him. “We are always seeking ways to improve, and we appreciate the feedback.”
BILLGUARD: “Zbiddy is a penny auction site. Participants must pay a fee in order to place a bid. Every bid placed extends the allotted auction time. Due to their high profitability and cheap set-up costs, penny auction sites have been growing steadily over the past few years. Zbiddy was a relative newcomer to the scene a few months ago but has already garnered a reputation for practicing shill bidding (bids placed with intent to inflate auction price) in order to drive up prices and extend auction length. We found this out when we were monitoring the trending scams on Google.”
RESPONSE:Two e-mails to ZBiddy’s customer service were answered only by auto-generated responses, like this:
“We have received your request. Your email is very important to us. We will answer your specific query within the next 24-48 hours. Answers to most of your questions can be found out by visiting our FAQ section. Best regards, The ZBiddy Customer Loyalty Team.” One week after the first e-mail, we hadn’t received a response.
UPDATE, April 23, 2012: Seth Dillon of ZBiddy contacted msnbc.com and offered the following response:
"I've reviewed and responded to the complaints on the BillGuard website. Thank you for bringing those complaints to our attention. .. (It) is not accurate that we have a reputation for shill bidding. ... ZBiddy does not now - nor have we ever - engaged in any unethical bidding practices to artificially inflate the cost of items on our site. With respect to the complaints about unauthorized charges, please note this reply, which has been posted on BillGuard: "To place bids and win products on Zbiddy, you must first register and purchase a bid package. This process is standard across the penny auction industry and is not exclusive to Zbiddy. If you have questions about the registration process, or if you were unaware that you were being charged at the time of your purchase, please contact our Customer Service department at 1-888-406-6509. Our friendly agents are standing by to take your call and help resolve your issue. The Customer Service Desk hours are Monday through Saturday from 8 a.m. to 12 a.m. ET."
BILLGUARD: “What Scoresense claims to offer are 'free' credit services such as credit score, credit monitoring etc., .... What actually happens is the following: The user feels safe in giving Scoresense their financial information in order to receive their 'free' credit report and usually fails to notice that the 'free' report lasts for a limited time, (after) which Scoresense uses the supplied financial information of the user in order to charge him monthly for a membership service.”
RESPONSE: A customer service representative who answered a telephone call told us to write to email@example.com. An email sent to that address was answered only with an automated response: “Thank you for your email inquiry to ScoreSense. Emails are typically responded to within 3 business days. If you have an urgent matter or wish to cancel your account please contact customer care toll free …” After 48 hours, we hadn’t received a response.
BILLGUARD: “TWX/Synapse uses a data pass model in order to trick consumers into costly subscriptions. What happens in data pass models is the following: Consumers buy a product at a participating third-party merchant. The merchant may be a physical grocery store or an online shop. During or after the checkout process the consumer is offered a free trial for magazines of his choice. Assuming that the company offering him the magazine subscription does not have his financial information and that he is entering a 'no-risk' trial period, the user signs the dotted line. What he does not realize is that the financial information he supplied to the participating third-party merchant is passed on to TWX and will later be used to charge him for the magazines once the free trial ends, without any notice between the trial and paid periods.”
RESPONSE: “Our customers are incredibly important to us, as millions of them enjoy our services. Terms are disclosed clearly, including verbally if the sales environment is face to face. Additionally, if consumers for whatever reason are dissatisfied, we work very hard to settle any issues to their complete satisfaction. We have an A+ rating with the Better Business Bureau for these and other reasons. Please attribute to a Synapse Spokesperson.”
BILLGUARD: “Short-term daily loans is are a growing field. The lender typically offers a short-term loan for very high interest rates. In this instance, the merchant offers to find you a suitable short-term loan provider. LendNet is in essence a middle-man. In order to find you a good loan provider LendNet requests your financial information. It then uses the supplied information to bill you for a service fee ranging from $30 to $50. You need to have super-human vision and at the very least a law degree in order to find this fee in the fine print of the terms and conditions. In addition to this sneaky fee, some users have also reported that they were subsequently given a loan from a third party without prior consent to the loan terms or conditions resulting in monstrous interest rates.
RESPONSE: The website is now down; e-mails sent to it were returned as undeliverable. There’s a host of complaints about the site in other locations online, including this one.
BILLGUARD: “FreeShipping.com offers to supply you with free shipping from various merchants for a flat monthly fee. The problem is that FreeShipping works with multiple third-party merchant affiliates who unknowingly subscribe you to a membership. During the checkout process with the third-party merchant there is a small button at the bottom of the page, usually opted in by default, and unless you notice it and opt-out, your financial data is passed on to FreeShipping and you are a monthly paying member.”
RESPONSE: Thomas Caporaso, FreeShipping.com CEO, said BillGuard’s description of the service was “simply untrue.”
“There is no way that we can collect any billing information from the user without them physically entering it into our member registration form,” he said. “When people register for FreeShipping.com, they must enter all of their information into our signup page, including their credit card number and billing address. The terms of the offer are presented clearly, immediately next to where they would enter their credit card information, explaining that they may cancel at any time within the 30 days with no charges to their card, and that after the 30 days are over, the subscription converts into a paid membership at $12.97 per month. They are also required to check a box agreeing to the terms of service before we are able to process their trial. Lastly they may cancel at any time after that with no additional billing from us.”
Many of the complaints generated against FreeShipping.com involve third-party websites sharing consumer information with the service. Caporaso said those consumers are also informed of the cost.
“Regardless if the member goes directly to Freeshipping.com or through a third-party merchant the enrollment process is the same as outlined,” he said.
There are many complaints about FreeShipping.com across the web, such as at this page. To support its complaint about Freeshipping, BillGuard also pointed to this lawsuit against the firm, and noted that there are 341 complaints about the company on ComplaintsBoard.com, and 66 complaints on Scambook.com.
BILLGUARD: “A free sample of a miracle diet product! Unfortunately, as some of our users learned, unless you call them and request to opt out within a few days of placing your free trial order you are sent a second package for the pricey sum of $75. The main reason most users do not call to cancel their subscription is that they never knew they were enrolled in one to begin with. Cellulean requests your financial information during the checkout process of the free trial supposedly to cover the shipping costs. What they are actually after is your financial information so they may bill you monthly for their product.”
RESPONSE: An operator at Cellulean’s customer service center told us to write an e-mail to CEO Patrick Leddy. He sent this response:
"Our website and offer meets all legal guidelines set forth by the Federal Trade Commission and the Electronic Retailing Association (ERA). In fact, we place our terms and conditions in full-size readable font right next to the ordering section, instead of hiding them at the bottom of the page (which is the FTC/ERA requirement). We then go another step further, beyond the requirements, by placing a check box next to the order button, which states: "I am 18 years of age and agree to the Terms and Conditions". The customer is not allowed to check out of the website unless this box has been checked. Furthermore, we give the customer two direct purchase options, instead of just the free trial offer, allowing them to choose if they want to enter into the agreement, or simply buy the product with no terms or conditions. When a complaint has been made by a customer, stating they were shocked when they were billed, and never knew they enrolled themselves into such a program, we have to scratch our heads in wonderment. This is a classic case where the customer attempts to pass blame on to the manufacturer, when in fact they entered themselves into a legal binding agreement - with their full knowledge and consent beforehand. Customers are not forced to place an order, they do so freely on their own willingness, and should be accountable for their choices."
BILLGUARD: “Redstarworldwear is an online retailer of sunglasses and watches. They send out gift certificates “worth” $500 to unsuspecting consumers informing them that they have won a special prize. Joyful of the prize, the unsuspecting customer then goes to Redstarworldwear website and purchases as much as he can using his newly minted gift card. During the end of the checkout process the customer is informed that there is a separate shipping and handling fee that cannot be deduced from the gift cards value. The customer then enters his financial information in order to pay for the (that), which turns out to be a costly 9 percent of the order value. We were interested how valuable these supposed $500 gift certificates actually were so we had a look around eBay, they can be had for under $2!”
RESPONSE: The firm did not reply to two e-mails, but a section of its website offers an explanation for confusion over the gift cards, and makes clear consumers aren’t getting something for nothing.
“There is a 9% Service Fee (per item) that pays for all expenses that RedStar incurs to get the product into your hands. This 9% service fee includes: USPS First Class delivery, processing and handling and general overhead which includes; customer service, order processing, warehousing, labor, cost of goods and materials, profit and marketing.”
There are other complaints online about the firm’s gift cards.
BILLGUARD: “Blizzard, the hugely popular merchant behind the Warcraft series, is not a name that usually comes up in discussions on unfair charges. So we were surprised to learn of several complaints from our customers regarding unwanted charges from them. After investigating the matter we learned that Blizzard enables a phone billing option called PaymentOne PhoneBill. This billing option allows you to pay for Blizzard games and subscriptions by merely entering your phone number information in the account settings tab. Obviously, given the young age and lack of credit card availability to some its users, this option has a high potential for unwanted and unauthorized purchases by young family members.”
RESPONSE: Blizzard was unable to provide a response by press time.
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