TechWatch: Who is to Blame for Failed Electronic Transactions?

It was only $22, not much in the broader scheme of things. But I tell the following true story to illustrate some important points about business ethics in an age of technology.

Closing a Credit Card

It started in June 2003, when I decided to open a Visa credit card with United Airlines, because I am a frequent flier and wanted to add to my mileage total. Since I stopped using the Bank of America MasterCard, I waited until all charges had been cleared, and all monthly transactions had been switched to my Visa card, and in September 2003 I closed the MasterCard account with Bank of America. Or thought I did.

In December 2003, I received a statement from Bank of America on the MasterCard account for $22, a renewal charge for Good Housekeeping magazine for my wife. My wife had decided not to renew, so I called the bank. After wading through lengthy voice mail menus, I managed to talk with a person and after some lengthy discussions, I thought the issue was closed. But the next month I got another bill with a service charge added. To protect my credit, I agreed to pay the bill and the bank agreed to dismiss the service charge. Another year of Good Housekeeping. But I was assured this would not happen again.

It Happens Again

In December 2004, I received a statement from Bank of America on the now 15-month-closed MasterCard account (now a Visa card with the same number) from Bank of America for $22. This time Bank of America explained to me that it was my problem, not theirs, and I would need to take this up with the magazine. I asked to talk with the manager to see if there was a way to permanently close the account. The manager’s idea was to suggest I reopen the card! It takes real training to try to sell new services to an unhappy customer! But after some discussion he said he could “purge” the account and no new charges would come through. But I would have to deal with the magazine in order to take care of the current charges.

So, I went to the magazine to find a phone number for the circulation department. When I opened Good Housekeeping a card fell out offering a one-year subscription for $18—more on this later.

So I placed a call to the magazine. With great surprise, I reached a human being after only a couple attempts. She explained to me that they outsource the renewal activity, so it was not their fault. If I wanted to deal with the subscription, I would have to contact their subscription service directly. And, no, she would not do it for me. She agreed to record a note saying I was unhappy with the service and she provided me with a phone number for the Magazine Service Center in Salt Lake City, Utah.

Dealing with the Service Center

When I called this number, it was answered by a voice asking me to make choices from a list, none of which were of interest to me — new subscriptions, extending subscriptions, etc. I wanted to talk with a human being to find out how they could automatically extend my subscription without my approval. Of course, none of the menu options gave me the opportunity to talk with a human. But by repeatedly providing nonsense answers to their questions, with the voice responding, “I don’t believe I understand your response,” the system finally connected me to a person. The usual “0,” or “#0*,” or “*0#” did not attract the attention of a person.

After describing the problem to the person on the other end, I got the answer I had been looking for, “It is not our fault.” She explained to me that a couple of months earlier they had sent me a letter requesting I send in a post card in order to discontinue the magazine, else it would be automatically renewed. Since they had not received such a card, I had given my approval to renew—at $22.

I don’t know about you, but the volume of “junk mail” that I get in my mail box is worse than spam — worse because of the trees that are cut down to send it to me. Much of our mail goes directly to the recycle bin without opening, and undoubtedly that was the fate of the letter from the Magazine Service Center.

They agreed to reverse the charges and cancel the subscription. They said it would take about six weeks. I explained that it had to be off in six days to avoid late charges and fees, and I expected that to happen. I then stopped back in the bank and explained what had happened, and they said not to pay the account and they would see to it that it was taken care of. They promised that my personal banker would call to verify this.

Back at the Bank

No call came from the personal banker, so a couple of weeks later I stopped back in the bank and verified that indeed there were no charges on the closed Mastercard from Bank of America. This time a personal banker was available, so I asked her to verify for me that the account had, indeed been “purged.” She explained that the credit card department was separate from the bank, but she would call them while I waited.

While she was on hold for five minutes, I asked her if she believed the recorded message, “Your call is very important to us.” She said she didn’t get that message because she was on a special direct internal line. When she did get through, she found that apparently there is no such thing as purging an account, and I would have to make sure I dealt with all the merchants who had been authorized to use my card for “ongoing services.”

Who is at Fault?

Who is at fault here? Candidates would seem to include Bank of America, Good Housekeeping, the Magazine Service Center, and me.

Let’s start with me. I learned that I should read all of my junk mail and never use a credit card to buy a magazine. I probably won’t do the first, but I will be much more careful about the second.

What about the Magazine Service Center? I am sure their business practices gain them a few extra dollars. Most people wouldn’t spend the hours I did for $22. And because they are a faceless, unknown company operating as an intermediary (I couldn’t find a website or any reference to them with a Google search), they likely care much less about their reputation. In our age of the technological automation of these processes, faceless companies like this have grown up. Likely, no human being ever looked at any of the transactions that automatically renewed my subscription at more than the going rate.

What about Good Housekeeping? First, their representative on the phone took no responsibility for the company to whom they had outsourced. President Harry Truman used to say, “The buck stops here.” Even if Good Housekeeping is not the one doing the work, they are responsible. It is their reputation on the line. This is just bad business. Worse, charging a loyal, repeat customer more than the advertised price seems like an appalling practice. An executive friend from said the magazine industry is one of the last to catch on to the idea of rewarding loyal customers rather than penalizing them. Remember, I started this saga by switching credit cards to one that would give me United Airlines miles. The miles I fly each year allow me to get upgrades, go through a shortened security line, and get free trips. That caused me to switch my credit card, and keeps me coming back. Quite the opposite for magazines.

Finally, what role does Bank of America play? Certainly service holes were exposed in this story—lack of call back, call waiting, inconsistent information. But ultimately I do not understand the practice of continuing to allow charges against a closed account. When I asked my personal banker how they justify this, she said she advises customers just not to pay these charges. Of course, that won’t work because it affects my credit rating. Ultimately, the bank is the face to the transaction, and they offer no solution.

An Ethical Issue?

Though I can’t be sure, there were probably no violations of the law in this story. Defining business ethics narrowly as compliance with the law would take this out of the ethics realm. But at IBTE we define business ethics to include not only legal, but appropriate and desirable practices. Surely there is an ethics problem by this definition.

I wonder how all of this would play out without the technology? I think people would sit down together over a cup of coffee and find a reasonable solution. But in this scenario that is not possible, because everyone blames someone else, or blames “the computer.” We will not eliminate the technology, nor should we. Without it, there would be no electronic commerce, something we all depend on today. But, systems designers should look carefully at scenarios like this and refine the rules in the systems they develop. Unintended consequences in any system are going to happen. It is just not acceptable to ignore these unintended consequences rather than to learn from them.

An Offer for Readers

So it was only $22, but it was many hours and I learned a great deal. I have decided not to use the Magazine Service Center for handling the Ethix subscriptions. And I have decided to offer a reduced rate of $22 for a new one-year subscription—or $18 for a one-year extension to an existing subscription to reward loyal readers—to anyone who writes “Good Housekeeping” across the insert card and sends in their check by May 1, 2005.

Al Erisman is executive editor of Ethix, which he co-founded in 1998.
He spent 32 years at The Boeing Company, the last 11 as director of technology.
He was selected as a senior technical fellow of The Boeing Company in 1990,
and received his Ph.D. in applied mathematics from Iowa State University.