First USA Agrees To Third-Party Data Sharing Reforms

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First USA Bank, the nation's largest issuer of credit cards, has agreed to reform its telemarketing practices in a settlement of a multi-state investigation into its third-party marketing partnerships, the New York attorney general's office said Tuesday.

The three-year investigation by 28 states and Puerto Rico found that First USA provided third parties with information about its credit card holders, the attorney general's office said. These parties would use the information in their marketing, including such tactics as free-trial offers and incentives such as airline tickets, according to the attorney general's office.

The third-party partners failed to fully disclose the terms of the offers and make clear that consumers would be billed if they failed to cancel within the trial period, even if they did not give their billing information directly to the partner, the attorney general's office said. Products marketed by third parties to First USA cardholders included insurance products, membership clubs, discount shopping programs and pre-pay plans.

As part of the settlement, First USA agreed to review all telemarketing scripts used by its third-party partners, force partners to comply with state and federal laws and require them to clearly state their identities if the use the name of the bank in their solicitations.

First USA also will pay $1.3 million in the settlement, which will be divided by the states. The settlement resembles another multi-state agreement with Citibank, which in February 2002 agreed to pay $1.6 million and make broad reforms to its practices of sharing cardholder data with telemarketers.

In its announcement of changes to the Telemarketing Sales Rule in December, the Federal Trade Commission stated that marketers who use free-trial or negative option offers in conjunction with pre-acquired consumer billing data are required to obtain at least the last four digits of a consumer's account number prior to billing. In addition, negative option marketers are required to make audio recordings of their telemarketing calls and obey new disclosure rules.

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