WASHINGTON, D.C.—Every day millions of consumers sit down in front of their computers to make travel plans, to send somebody flowers, or to order movie tickets.
For many Americans, shopping online is now as routine as going to the grocery store for milk. According to a recent survey, 59% of adult Americans have now purchased goods or services over the Internet.
Shopping online is an exciting new way for people to learn about products, to compare prices, and to find a good bargain. And in tough economic times when Americans are doing all they can to make ends meet and provide for their families, every dollar counts.
But when we go online to buy things, we all have a few very important expectations about how we should be treated – regardless of how and where we purchase.
First of all, we expect the merchants we do business with on the Internet to treat us honestly and fairly.
We expect online merchants to clearly explain their prices and terms to us, so we know what exactly we’re getting if we decide to spend our money at their websites.
And when we agree to buy something from them, we expect merchants to protect our credit card and other financial information that we share with them.
That’s why it’s so disturbing to me to learn through our investigation what’s happening to millions of American consumers every day who are shopping on the Internet - including the two consumers we have invited to testify today.
What’s happening is that many online merchants have decided to betray their customers’ trust.
For a few extra bucks in profits, these merchants pass their customers’ personal billing information on to mysterious companies with names like Affinion, Vertrue, and Webloyalty - companies that have a long, troubling history of misleading sales practices.
From the consumer’s point of view, here’s how it happens.
You’re shopping online and you decide to send somebody flowers or buy movie or airline tickets – or even order a pizza. You type in your home address, your e-mail address, and other information necessary to process the sale.
Then at the very end of the process, you do the really important thing. You pull your wallet out, you type in your 16 digit credit or debit card number, and you press “Purchase.”
What our Committee has been investigating is what can happen to you after you make your purchase. It’s truly unbelievable.
While you think you’re going through the final “check out” process, what’s really going on is that some very sophisticated online businesses are tricking you into signing up for useless “membership clubs.”
These businesses take the credit card number you typed in for your purchase, and they use it to enroll you in bogus clubs with names like “Reservation Rewards,” “Great Fun,” or “ValueMax Shopping Service.”
Most consumers don’t realize they have been scammed until months later, when they notice that the club has been charging their credit card $10.95 a month.
WHY THIS MATTERS:
A 10 dollar monthly charge may not sound like a big deal to many people in this room, but consider these numbers:
Today, as we conduct this hearing, there are more than 4 million American consumers whose credit cards are being charged by these clubs. And most of these 4 million consumers don’t even know it’s happening.
According to a report the Commerce Committee staff presented to me about this problem, these online club scams have made more than $1.4 billion dollars through these tactics and charged more than 30 million Americans.
Consider those numbers for a moment – that is a lot of money and simply outrageous to me and frankly, it should be to all of you.
What I find most outrageous about these scams are the reputable online businesses that have been willing to take part in these scams.
Committee staff has provided me a list of 88 well-known online businesses that have each made more than a million dollars through sharing their customers’ credit card information with internet scammers. We have printed copies of these lists for anyone interested – it’s worth a look.
We’ve all heard of these companies, and we’ve probably shopped at some of their websites.
America is a country of businessmen and businesswomen. We all have a great deal of respect for enterprising people who develop good products and sell them in our competitive marketplace.
But we are here today because we want to highlight the very important point that tricking consumers into buying goods and services they do not want is not okay – not even close.
It’s not ethical, it’s not right, and it’s not the way business should be done in America.
American consumers shouldn’t have to worry that their favorite websites are ripping them off during the checkout process.
We haven’t completed this investigation yet, but what I’ve learned about these business practices so far is very troubling. And, starting with this hearing today, I think this Committee needs to start thinking about the legislative steps we can take to end these practices.
I look forward to hearing from our witnesses today.