A directive Visa issued last week should make it clear to online merchants that they are not allowed to offer consumers third-party offers without asking for their card information a second time, the card brand noted in an April 27 statement.
The issue came to the forefront in December, after U.S. Sen. Jay Rockefeller IV, D-W.Va., asked Visa, American Express Co. and MasterCard Worldwide for information on how they handle “data pass” transactions. Data pass transactions occur when a consumer, usually shopping at a familiar website, receives an offer for a discount or reward and does not realize it is from a different merchant and comes with unwanted recurring fees, Visa says.
The Senate Commerce Committee, which Rockefeller chairs, had been investigating online marketers involved in this practice last year. In November, Rockefeller also sought information from Classmates Online Inc.; Fandango, a unit of Comcast Corp.; Hotwire Inc.; Priceline.com Inc.; and other e-commerce merchants about their relationships with these online marketers.
The tactic helped Affinion Group, Webloyalty Inc. and Vertrue Inc., all of Norwalk, Conn., and the e-commerce companies that used their services to earn more than $1.4 billion in revenue, according to a committee report, which did not specify the timeframe.
Visa published the rule clarification to ensure online companies better understand the practice is forbidden, Martin Elliott, Visa senior business leader for U.S. payment system risk, tells PaymentsSource. Visa’s operating rules prohibit merchants from sharing cardholder data with any entity not directly involved in completing the transaction.
“We felt it better to explicitly call it out,” Elliott says. All three of the Web-marketing companies have renounced that practice, he says.
Merchants now have to prompt consumers to re-enter their card information to accept an offer from a third-party merchant to indicate a second purchase is happening, Visa says.
Visa also contacted the acquiring banks handling these types of transaction. “When we first learned of this practice from Sen. Rockefeller in December, we quickly identified which acquiring banks were processing for the three data-pass merchants,” Elliott says. That successfully halted the data-pass transactions, he says.
Merchants not abiding by Visa’s data-pass rule potentially could face fines or lose their ability to accept Visa cards, Elliott says, noting Visa first will attempt to work with the merchant’s acquiring bank to resolve the issue.
MasterCard also prohibits “data pass” transactions, a spokesperson for the card brand says.
American Express says it is reviewing its merchant regulations that pertain to this issue. Specifically, AmEx says it will require that merchants clearly and conspicuously disclose the terms of a sale so its cardholders know who they are buying from, an AmEx spokesperson says.
AmEx cardholders will have to re-enter their card information a second time if they choose to make an add-on purchase, the spokesperson says. AmEx shares the Senate committee’s concerns about the alleged unfair and deceptive practices, she says.
