Agreement ends lawsuit with two attorneys general BrandDirect, a Shelton, CT-based telemarketer of buying-club memberships, has settled a lawsuit with the Washington and Connecticut state attorneys general over alleged deceptive telemarketing practices and misuse of private financial information.
The company will pay a total of $1.9 million in penalties, fees and consumer education funds, and about $11 million in restitution. In the lawsuit, it was accused of charging people for buying-club memberships without permission and engaging in other deceptive and unfair practices.
Tom Drohan, the telemarketer’s spokesman, said he was “disappointed in the tone” of the statement of the attorneys general. He claimed that his firm had been reviewing its marketing practices with both officials for the past year, and denied any wrongdoing.
BrandDirect uses data provided by financial institutions, including First USA Bank, Citibank and Chase Manhattan Bank, to develop lists of consumers. Its telemarketers then contact these prospects with an offer to join discount-buying clubs that cater to their particular interests. The company obtains members’ charge card information from the banks, allowing it to conveniently bill those who agree to join.
The suit alleged that in some instances the firm used this financial information to make unauthorized charges against individuals’ accounts, Washington Attorney General Cynthia Gregoire said.
Under the settlement, the two states will share the $1.9 million award. Current buying-club members nationwide will each receive three weeks’ free membership – an estimated value of $4 per member, according to Drohan.
The settlement also prohibits the company from engaging in future deceptive practices and requires it to make specific disclosures about its ability to charge consumers’ credit cards. The firm must also improve cancellation, automatic renewal and refund procedures.
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