Fox in the Henhouse

KeyBank hires a company accused of fraud to . . . protect you from fraud.

"They are so full of it," Dottie Zampino says of Vertrue. - Walter  Novak
"They are so full of it," Dottie Zampino says of Vertrue.
When you're living on Social Security and retirement benefits, you tend to keep a close watch on your bank account.

So when Dottie Zampino noticed an extra $199.95 charge on her account in October, she was suspicious. She called the bank and discovered the bill was for something called 24Protect Plus. The Northfield Center woman never heard of the company, whose website claims to offer discounts on everything from pet supplies to roadside assistance.

Turns out she signed up for the program on AOL, where a few unknowing clicks can quickly drain your bank account.

In the past few years, customers nationwide have complained they were charged for 24Protect Plus and other "membership programs" they never meant to buy. Vertrue, the Connecticut company whose subsidiaries sell the programs, has been the target of investigations in at least seven states, including Ohio.

Over and over again, Vertrue has been accused of charging customers' credit cards and bank accounts without their consent. The company usually settles the claims, without admitting any wrongdoing. It has never been convicted of fraud.

But Zampino says there's nothing subtle about Vertrue's tactics. "This is not just a misunderstanding or a mistake," she says. "I mean, this is fraud."

Vertrue paid AOL for the right to sell to its internet customers. To sign up for 24Protect, Zampino must have clicked on an ad, though she doesn't remember clicking anything. The company says she enrolled in a 30-day trial that turned into an annual subscription. Since AOL had already sold Vertrue her bank information, she was charged automatically -- without even knowing it.

Now, Vertrue has embarked on a new venture in Cleveland. KeyBank recently signed up the company widely accused of fraud to -- you guessed it -- protect its customers from fraud.

Vertrue, launched in 1989, describes itself as a "leading consumer services marketing company," offering membership programs for everything from health care to discount shopping, insurance to online dating. Though it has undergone many name changes and sprouted subsidiaries, its legal battles have been a constant.

Six years ago, Minnesota Attorney General Mike Hatch sued the company and three of its subsidiaries for false advertising, deceptive trade practices, and consumer fraud. Hatch alleged that Vertrue -- then called MemberWorks -- had paid more than $4 million to U.S. Bank for access to its customers' financial information.

Telemarketers would use the bank and credit-card information to call customers, offering to enroll them in 30-day free trials for various programs. Since customers never had to provide a credit-card number, there seemed to be little downside to the offer.

What they didn't know was that U.S. Bank had secretly provided their financial information to Vertrue. And its salespeople failed to explain that the trials would automatically turn into paid subscriptions, Hatch alleged.

Vertrue eventually settled the suit, agreeing to change its sales tactics and give double refunds to disgruntled customers.

But the complaints continued in other states. In New York, the attorney general accused Vertrue of running the same free-trial scheme, this time targeting customers whose information had been purchased from Citibank.

Less than a year later, the company paid $1.5 million to settle a similar suit in California, according to the Los Angeles Times.

That same year, the company signed an "assurance agreement" with Nebraska that compelled it to change its marketing practices nationwide. Its telemarketers would have to explain more clearly when customers would be charged and send notices in the mail before renewing memberships. Vertrue also had to give automatic refunds to anyone complaining of unwanted charges.

In each of these cases, the company denied any wrongdoing.

But its telemarketers kept selling. And the internet offered a lucrative frontier.

In 2002, Vertrue signed a "marketing agreement" with AOL. According to the transcript of a public company conference call, Vertrue paid at least $4 million for access to AOL customers. Those who clicked on pop-up ads offering free trials and discount coupons could now easily -- and often unknowingly -- sign up for Vertrue's programs.

Consumer-affairs websites began to light up.

"AOL gave 24Protect Plus my personal and credit card info without authorization . . . apparently I accidentally hit a pop-up to trigger this," wrote Carol Bennett of Maryland on Bennett said she got a partial refund, but it took her five months to notice the charges.

In the fall of 2003, Florida's attorney general sued Vertrue for deceptive and unfair trade practices, and for scheming to defraud customers. From December 2000 to May 2001, more than half of Vertrue's sales on Discover cards were reversed because customers disputed the charges, the suit alleged. Futhermore, former Vertrue customer-service reps admitted that up to 90 percent of the calls they got were complaints about unwanted charges.

Vertrue settled the suit for $950,000, but denied the allegations. Its defense tactics had come to mirror the Robert Downey Jr. approach to drug problems: Get caught, repent, then start all over again.

Meanwhile, Ohio Attorney General Jim Petro was receiving hundreds of complaints about the company. In March 2004, Petro cut a deal in which Vertrue agreed to follow rules it should have obeyed all along: Don't charge renewal fees without "expressed, verifiable authorization" from the customer, send people a notice before you renew, and give refunds to people who contest the charges.

But the complaints kept rolling in. In the last three years, there have been 235 from Ohio customers to Better Business Bureaus. Nationwide, there were 2,162, although most are now classified as resolved.

In September, KeyBank announced a deal with a Vertrue-owned company to provide identity-theft protection to the bank's customers. For $9.95 a month, people can join Privacy Matters, which offers antivirus software, a document shredder, weekly fraud alerts to show changes in a credit record, and up to $25,000 in theft insurance.

KeyBank spokesman Mike Sherman declined comment on why the bank hired Vertrue or how many people have signed up for the program. It's also not clear what KeyBank gets out of the deal. Though they don't like to advertise it, banks often receive royalty payments for providing Vertrue with their customers' intimate financial information. But neither KeyBank nor Vertrue will talk about their deal.

"They are a business partner of ours," is all Sherman would say.

Meanwhile, a Vertrue spokeswoman seems offended by the notion that KeyBank customers might worry that a company like Vertrue has access to their information. "That's a very harsh way to put it," says Sandy Malone, vice president of public affairs.

She argues that Vertrue -- whose revenues topped $579 million in fiscal year 2005 -- is a "very little fish" in what is apparently a big pond of questionable marketing companies. Less than 1 percent of the "many millions of members" enrolled in its programs complain, Malone says. Also, Vertrue has "very stringent pro-consumer policies," which include no-questions-asked refunds.

"We've given up a lot of money to make sure that people are happy," Malone says.

Neither Dottie Zampino nor Carol Bennett ever told a Vertrue representative that her membership fees were "unauthorized," Malone claims.

Bennett started a 30-day trial for 24Protect Plus in January 2004 when she accepted a free online credit report, Malone writes in a letter to Scene. She clicked "yes" on a page that explained the trial period and ensuing membership fees, and was later sent e-mails reminding her that she would be charged. But she didn't cancel until June 2004, and that month's $14.95 membership fee was refunded, Malone says.

As for Zampino, Malone insists that there's no way she was unaware of her membership. Zampino enrolled online in November 2003, says Malone, and the page she clicked on was just like Bennett's. She was also sent e-mails reminding her that she would be charged, Malone says.

Furthermore, company records show that Zampino called about her membership less than two weeks after she enrolled, and she decided to keep it. She then remained enrolled through 2005, paying $134.95 the first year and $179.95 the second. During this time, Malone says, the company mailed Zampino renewal notices, explaining how she could cancel. It wasn't until October that Zampino canceled and got a refund for her latest $199.95 charge.

"I feel like, looking at this, we took good care of her," Malone says.

Zampino, however, is appalled by the company's explanation. Until she was contacted by Scene, she didn't even know that Vertrue had charged her twice in the past. She says she never signed up for anything, never received renewal notices, and never got any benefits from the program.

"They are so full of it," she fumes.

After digging out old bank records, she called Malone and demanded to hear a recording of the phone call in which Zampino supposedly opted to stay in the program. But Vertrue doesn't keep tapes that long, Malone says. Nor could she supply any record of Zampino actually using 24Protect Plus.

Malone promised to send a refund.

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