FTC Alleges Discount Club Auto-Renewal Scam

The Federal Trade Commission is accusing several discount clubs, including Saving Pay Club, Savings Makes Money, and Money Plus Saver, of perpetuating a scam that signed consumers up for subscriptions to coupons without their permission.

The FTC hit the operators with charges that the discount club auto-renewal scam charged initial fees up to $100 and additional monthly service fees ranging from $14 to nearly $20. The discount club auto renewal scam used telemarketing and websites to target consumers with payday loans.

The FTC alleges that the discount club operators took account information from consumers who thought they were applying for a loan, but actually signed them up for auto-renewal subscriptions to coupons.

The operators of the alleged discount club auto-renewal scam include EDebitPay LLP, Hornbeam Special Solutions, and iStream Financial Services. The FTC claims that consumers were targeted by the scam from 2010 until 2016.

According to the FTC, after being tricked into providing account information to apply for the advertised loan, consumers’ financial accounts were debited using electronic remotely created checks. Hundreds of thousands of consumers complained to the agency, leading to the complaint.

This wasn’t the first discount club auto-renewal scam from these companies, alleges the FTC. In 2008, the companies settled a complaint with the FTC alleging that subprime consumers were charged without prior permission. As part of the settlement agreement, the companies were prohibited from starting another discount club without the FTC’s knowledge; however, says the FTC, the companies began another discount club in 2010 without notifying the agency.

The discount clubs contend that the FTC does not have enough evidence to establish that the $185 million they attempted to withdraw from consumers’ accounts was done without consent. According to the FTC, the companies were only able to garner a fraction of that amount because the banks returned the electronically created checks they used.

Auto-Renewal Scams

With the advent of the internet, more companies are offering subscriptions for goods and services for a monthly fee. Unfortunately, some unscrupulous companies dupe consumers into signing up for auto-renewal scams without their knowledge or consent.

Some states are working to protect their residents from auto-renewal scams. Companies who use auto-renewal practices should adhere to a few simple standards:

  • Provide terms that are clear and conspicuous;
  • Solicit affirmative consent from consumers;
  • Provide terms of the auto-renewal;
  • Cancelation terms should be clear, easy to find and follow;
  • Provide notification of any changes to the auto-renewal; and
  • Provide notice of upcoming auto-renewal charges.

Both the FTC and the Better Business Bureau have issued warnings against auto-renewal scams. According to the Better Business Bureau, consumers can help by reporting auto-renewal scams to them and the FTC so they can help track the schemes and report them to other consumers and lawmakers.

Consumers can also help protect themselves by looking for suspicious fine print, reading online reviews, and monitoring their financial records for auto-renewal charges.

If you have been duped into an auto-renewal scam, contact the attorneys at Bradley/Grombacher to help evaluate your claim.