Consumer Discount Company Settles With County Over Billing

A consumer discount company that allegedly misled customers about billing practices has agreed to pay $750,000 to Ventura County as part of a larger lawsuit settlement.

MemberWorks Inc., a Connecticut-based company, agreed to settle rather than fight the suit filed against it by Ventura and Orange counties as well as the state attorney general’s office on behalf of consumers.

The company contracts with Sears, Roebuck and Co. and offers discounts on everything from air fares to dental work. Investigators say MemberWorks unfairly charged Sears customers for services they never used.

MemberWorks and Sears settled Friday in Orange County Superior Court.

A spokeswoman for MemberWorks denied the allegations.

Investigators said MemberWorks telemarketers misled and confused consumers about billing procedures as well as renewal and cancellation options.

Consumers who agreed to a 30-day trial period received a packet in the mail with directions for service cancellation written in small type on the back, said Michael Schwartz, a Ventura County senior deputy district attorney who worked on the case.

If customers did not cancel they would be billed an annual fee of between $49 and $89, he said.

The judge ordered MemberWorks to pay $1.5 million and Sears to pay $500,000 in civil penalties and costs. The state will collect $500,000 while Ventura and Orange counties split the $1.5 million.

Ventura County has already received $350,000 of the settlement. The money will go into the county’s general fund, Schwartz said.

MemberWorks must now note prominently that customers will be charged unless they cancel. Notices will go out to 1.5 million customers explaining the settlement and informing them they may be eligible for a refund.

MemberWorks Chief Executive Officer Gary Johnson said the company has implemented new marketing practices, including new telemarketing scripts in which policies are more clearly spelled out.