Originally published 11/22/09

It's not entirely clear when Jeff or Debbie Bollinger gave the keys to their bank account to a Connecticut company they'd never heard of: Webloyalty. Their best guess is that it happened in late 2007, after Jeff bought movie tickets online at Fandango.

All the West Reading couple know is that they discovered last December that Webloyalty had been extracting $10 a month from their joint checking account - supposedly based on a recurring debit card authorization - and that neither of them had knowingly signed up for anything.

"I was livid," Debbie says, recalling the day she finally realized they'd been charged for a year for something her husband didn't recognize, either. "I thought the $10 charge was something he did, and he thought it was something I did. "

That's been the pattern at Webloyalty and at two other Connecticut businesses, according to a report last week by staffers at the U.S. Senate Commerce Committee who are investigating the three companies' online practices.

If the companies' names - Webloyalty, Affinion , and Vertrue - don't ring a bell, one reason may be that two of them have changed. Affinion was once called Trilegiant. Vertrue was MemberWorks. As Trilegiant and MemberWorks, both those companies were repeatedly targeted in consumer-protection lawsuits by state attorneys general.

Even if none of these names sounds familiar, don't assume you've never encountered them. In the last decade, the Senate report says, the three have enrolled 35 million customers. In June, they counted four million members - and chances are good that most were unaware.

Could you be among them? You might want to pull out your own credit card and bank statements and scrutinize them more closely. Don't just look for those companies or their "membership club" programs, such as Travel Values Plus, Live Well, or Shopping Essentials. Look for any mystery charges, and don't hesitate to question them.

You may wonder how you could be billed unwittingly for a service you don't even know exists.

That's what makes this story so scary. The key is that these companies never have to ask you for your billing information. They already have access to it, because they buy it from the businesses they partner with - a list that the report says includes some of the best-known and busiest sites on the Web.

From a consumer's viewpoint, the business model - called "preacquired account marketing" - works like this:

You freely give your business to one company - say, your bank or an online retailer. In the process, you freely give that company your credit or debit card number and other billing information.

Then along comes another company, as Webloyalty presumably did via an ad on the Bollingers' computer screen. It offers you something tempting, such as "$10 Cash Back on Your Next Purchase," or 30 days' free membership in a discount club.

Perhaps you say "Yes," or perhaps you simply open the ad by mistake and then click "Continue," thinking it's the right way to complete your original transaction.

Either way, the trick is that the marketing company can then do the rest all by itself. It gets your credit or debit card number from the company you meant to do business with.

In other words, you never have to take the affirmative step that most of us consider essential to any transaction, especially with a company we've never dealt with before: pulling out cash, check, or plastic and paying for what we've bought.

The Senate committee is shining new light on an old problem that, unfortunately, goes well beyond its immediate targets.

Preacquired account marketing has its roots in aggressive tactics used by direct-mail and telemarketers. The tactics have occasionally embarrassed the prominent financial institutions and retailers these companies partner with, but apparently not enough to outweigh the bounties they earn for delivering customers.

For instance, in 2006, 16 states' attorneys general reached a multimillion-dollar settlement with Trilegiant and its partner, Chase Bank. The states said the companies had partnered to send "reward" checks to consumers without adequately disclosing that cashing the checks would enroll the consumers in membership clubs, with fees charged to their bank accounts.

In 2003, the Federal Trade Commission tried a simple fix to stop telemarketers from using the same tactic: to make sure membership-club purchases were voluntary, a customer would have to provide at least four digits of his or her account number.

As the Senate's investigation was under way, all three companies announced plans to voluntarily impose that same speed bump on their Web transactions.

Webloyalty led the way Aug. 1. A spokeswoman declined last week to provide specifics, but she acknowledged its numbers were down as a result.

"Fewer people are enrolling, but we're getting people who really want to be enrolled in our programs. So it's working out for us," said Webloyalty's Beth Kitchener. "If you're doing something and it's making a lot of people angry, it's a good time to consider doing something else. "

Prentiss Cox, a Minnesota law professor and former assistant attorney general, says such a fix falls short because it can still leave customers unaware that they've agreed to be billed. "Why not the whole number?" he asks.

His skepticism is shared by Robert J. Meyer, a Wharton School marketing professor who joined Cox last week in testifying before the Senate.

Meyer says extremely low utilization rates for the programs - sometimes 1 percent or less - expose the business model as illegitimate. So, he says, do the hoops customers must jump through to actually get the discounts the companies tout - typically $25 gift cards that club members can buy for $20.

Those two characteristics are pieces of a puzzle, Meyer says: "The only way they can make money is if people don't exercise the option to use these cards. "

There is one small piece of good news: The companies are very experienced at giving refunds - especially to squeaky wheels who mention plans to complain to the Better Business Bureau or a state attorney general.

"If you use those magic words, then they'll give you your money back," Meyer says.

Debbie Bollinger, angry enough to complain to anybody who would listen, got a full refund.

Contact columnist Jeff Gelles at 215-854-2776 or jgelles@phillynews.com.