Visa Inc. (NYSE: V) announced today it is taking another step in an ongoing effort to protect consumer security and confidence in the payment system by prohibiting web merchants from providing cardholder information to other companies without the consumer’s knowledge or active consent.
The misleading practice, called “data pass,” usually involves a consumer shopping at a familiar retailer. At checkout, the consumer receives an offer for a discount or reward and does not realize it is from a different merchant and comes with unexpected monthly membership fees or recurring charges. Such deceptive marketing can result in high levels of consumer disputes and degrades the efficiency, reliability and security of the payment system. According to a 2009 U.S. Senate Commerce Committee staff report, 35 million consumers have paid $1.4 billion for “data pass” marketing offers (1).
“Visa’s priority is protecting our cardholders and the integrity of the electronic payments system. Consumers who shop online using their Visa cards 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,” said Martin Elliott, senior business leader, U.S. Payment System Risk, Visa Inc.
Visa’s rules already prohibit merchants from sharing a cardholder’s account number and other Visa transaction information with any entity that is not directly involved in completing the transaction, preventing fraud, or as required by law. To address the data pass practice, merchants will now have to prompt consumers to re-enter their card information to accept a subsequent offer from a third-party merchant. This provides a clear signal to cardholders that a second purchase is being initiated and protects them from questionable marketing practices.
In 2009, the U.S. Senate Committee on Commerce, Science and Transportation investigated the issue and merchants who use this practice.
“I applaud Visa’s decision to prohibit merchants from using ‘data pass’ marketing on its network,” said Senator John D. (Jay) Rockefeller IV, Chairman of the U.S. Senate Committee on Commerce, Science, and Transportation. “The Senate Commerce Committee’s investigation showed that this aggressive marketing practice enabled unscrupulous e-commerce companies to scam millions of American consumers out of more than a billion dollars. Our Committee’s investigation revealed how appalling this practice is and makes clear it should not be allowed – I’m glad to see Visa has reached the same conclusion.”
The announcement follows Visa’s program launched in December with the U.S. Federal Trade Commission and Better Business Bureau to educate consumers on deceptive marketing practices. Visa continues to aggressively enforce risk programs to identify and address merchants who use bogus marketing tactics to dupe consumers.
“Protecting cardholders is among Visa’s highest priorities, and we want to ensure every business in the payments system has the same commitment to ensuring consumer confidence,” said Elliott.
Visa credit and debit cardholders in the United States are protected by Visa’s Zero Liability Policy, which protects them from any financial liability in the event of an unauthorized purchase. Visa cardholders also have the right to dispute purchases. Visa suggests a few tips for online shoppers:
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Take time to read the fine print and understand all terms and conditions, so what you think is a free or discount offer doesn’t turn into recurring charges you didn’t intend to make.
* Review card statements when you get them for any unauthorized charges, and notify the card issuer promptly of any unusual activity.
* Try to resolve the situation with the merchant. If you’re unsuccessful, contact the card issuer immediately to dispute the charge.
(1) “Aggressive Sales Tactics on the Internet and their Impact on American Consumers,” staff report, Commerce Committee, U.S. Senate, November 19, 2009.
