MemberWorks, Sears to Pay $2 Million in Penalties, Fees

Share this content:
Teleservices firm MemberWorks and partner Sears, Roebuck & Co. entered an agreement yesterday with the California attorney general and two district attorneys who had investigated the companies' marketing program.

MemberWorks and Sears agreed to pay a total of $2 million in civil penalties and fees in response to concerns from the law enforcement officials about consumer confusion over disclosures in MemberWorks' telemarketing pitches.

The money will be split among the state and Ventura and Orange counties. A spokeswoman for the California attorney general's office did not immediately return phone calls seeking comment.

MemberWorks marketed memberships in discount clubs to Sears credit cardholders and members in California.

MemberWorks said it would begin implementing new standards for its telemarketing practices, including enhanced disclosure language. The company also said it would expand its program of sending customers mail notifications before charging them for membership renewals and would fully refund consumers who claimed to have received unauthorized charges.

In addition, MemberWorks has agreed to reimburse Sears for its $500,000 share of the penalties and fees.

MemberWorks commissioned Luntz Research Cos. of Arlington, VA, to test how understandable its marketing disclosures are to the general public. The company claimed that in a poll of 2,000 randomly selected Americans, 85 percent understood the disclosures.

MemberWorks has entered other agreements with the attorneys general of Nebraska and New York in response to concerns about its marketing practices. The company also settled a 1999 lawsuit from Minnesota Attorney General Mike Hatch, who alleged that the company "used confidential information obtained from banks and other institutions to charge consumers for services and products that consumers did not believe they had ordered."

The lawsuit claimed that MemberWorks solicited consumers with free 30-day trial memberships but did not affirmatively disclose to consumers that the company already had their credit card information. At the end of the trial period, the company used the account information to charge consumers a membership fee, according to the lawsuit.

MemberWorks later agreed to settle the lawsuit without admitting guilt by agreeing to change its telemarketing sales scripts, to provide advance notice of any upcoming membership renewal charges and to give double refunds to consumers whom the company failed to tape-record accepting the membership.


Next Article in Marketing Strategy

Sign up to our newsletters

Company of the Week

Brightcove is the world's leading video platform. The most innovative and respected brands confidently rely on Brightcove to solve their most demanding communication challenges because of the unmatched performance and flexibility of our platform, our global scale and reliability, and our award-winning service. With thousands of customers and an industry-leading suite of cloud video products, Brightcove enables customers to drive compelling business results.

Find out more here »

Career Center

Check out hundreds of exciting professional opportunities available on DMN's Career Center.  
Explore careers in digital marketing, sales, eCommerce, marketing communications, IT, data strategies, and much more. And don't forget to update your resume so employers can contact you privately about job opportunities.

>>Click Here

Relive the 2017 Marketing Hall of Femme

Click the image above