YNOT – As part of “an ongoing effort to protect consumer security and confidence in the payment system,” Visa Inc. on Tuesday announced new merchant rules that prohibit so-called “cross-sales” and other methods of providing cardholder information to third-party companies without the consumer’s knowledge and active consent.Officially known as “data pass,” the misleading practice usually occurs at checkout during online transactions. The consumer receives an offer for a discount or reward and does not realize the offer is from another merchant. Frequently, the offers are time-limited and automatically incur unexpected membership fees or recurring charges. Sometimes even up-front charges are concealed or disguised.
According to Visa, “such deceptive marketing can result in high levels of consumer disputes and degrades the efficiency, reliability and security of the payment system.”
In 2009, the U.S. Senate Committee on Commerce, Science and Transportation investigated the issue and merchants who employ data pass. A report released thereafter claimed 35 million consumers have paid $1.4 billion for data-pass marketing offers.
“Visa’s priority is protecting our cardholders and the integrity of the electronic payments system,” said Martin Elliott, senior business leader for U.S. Payment System Risk at Visa Inc. “Consumers who shop online using their Visa cards should be confident they will only be charged for the products and services they legitimately intend to purchase — not those that are foisted on them through deceptive data-pass schemes.”
Visa’s rules already prohibit merchants from sharing a cardholder’s account number and other Visa transaction information with any entity that is not directly involved in completing the transaction, preventing fraud, or as required by law. To address the data-pass practice, merchants now must prompt consumers to re-enter their card information in order to accept any subsequent offer.
In December Visa, in conjunction with the U.S. Federal Trade Commission and the Better Business Bureau, launched a program to educate consumers about deceptive marketing practices. Consumer education is only one piece of the puzzle, though.
“Protecting cardholders is among Visa’s highest priorities, and we want to ensure every business in the payments system has the same commitment to ensuring consumer confidence,” Elliott said.
The new policy reportedly will become effective May 1. Merchants that do not comply may have their transaction-processing privileges revoked. Banks that allow their merchant customers to disregard the new rules may be fined or face loss of their privileges, as well.
Visa did not respond to YNOT’s request for comment.
