Visa to crack down on 'misleading' tactic

(This article was originally published April 28, 2010.)

The process goes by an innocuous-sounding name, data pass, but it allowed something that congressional investigators found disturbingly deceptive: Online consumers were being billed for goods or services without ever intentionally providing their credit-card numbers.

Visa Inc. announced Tuesday that it would clamp down on data pass among companies that accept its credit cards - six months after a report by the U.S. Senate Commerce Committee estimated that the tactic had cheated 35 million consumers out of more than $1.4 billion in the last decade.

Commerce Committee chair U.S. Sen. Jay Rockefeller called Visa's decision a victory, but said he still planned to propose a law "to ban this deceptive practice once and for all."

Effective Saturday, Visa said, it will no longer allow companies to pass credit-card information to third parties, which the firm, under pressure from Rockefeller, now labels a "misleading practice."

According to the Commerce Committee's report, the process works like this:

A consumer completes an intentional deal on the Web, such as purchasing movie tickets at Fandango or airline tickets on Priceline. But before leaving the site, the customer gets an additional lure - and is hooked into an unintended transaction, consummated without the consumer's ever having to retype his or her credit information.

The Commerce Committee report did not say Visa or other transaction networks were behind the deceptive offers, typically something like, "$10 Cash Back on Your Next Purchase!" Instead, the offers likely came from one of three Connecticut companies - Affinion, Vertrue and Webloyalty - that were the main focus of the committee's inquiry.

But the transactions were enabled by policies such as Visa's data-pass rules, which allowed sites such as Fandango or Priceline to pass the customer's credit-card information to the advertiser pitching the offer.

In the fine print, the site might explain that the "$10 cash back" offers came in return for taking trial memberships in a discount club.

The Commerce Committee found that most consumers did not even know they had joined, cancel when they discover an unexpected monthly charge, "and never receive any benefit from their club membership."

Consumers weren't even getting what lured them in the first place. In reviewing data from the companies on 34.4 million transactions, the inquiry found that only 3 percent actually received the promised enrollment benefit.

Visa said its new rules would bar Web merchants from providing cardholder information to other companies "without the consumer's knowledge or active consent."

"Consumers who shop online using their Visa cards," said Martin Elliott, a Visa official, "should be confident that they will only be charged for the products and services they legitimately intend to purchase - not those that are foisted on them through deceptive data-pass schemes."