CONTACT: Geoff Greenwood,
FOR IMMEDIATE RELEASE,
October 27, 2010
Miller Lawsuit Results in Halt of Buying Club Operationís Deceptive Practices Nationwide,
Company official testifies to nationwide reforms adopted after Millerís lawsuit and court ruling
(DES MOINES, Iowa) The general manager of a buying club accused of consumer fraud by Attorney General Tom Miller testified that the company changed its marketing practices across the country as a result of an Iowa District Court liability ruling in March. The liability ruling followed Miller’s consumer fraud lawsuit filed against the company in May of 2006. The lawsuit focused on the sale of more than 860,000 Iowa “memberships” over 20 years.
Bruce Douglas, the General Manager of Adaptive Marketing, a subsidiary of Vertrue, Inc., testified in a Polk County District Court hearing on Tuesday that after Polk County District Judge Robert A. Hutchison ruled that the operation had committed consumer fraud, the company halted all marketing in Iowa and reformed marketing in other states.
The March ruling found Vertrue and its two subsidiaries, Adaptive Marketing and Idaptive Marketing, liable for violating Iowa’s Buying Club Memberships Law and the Iowa Consumer Fraud Act. The ruling also found that nearly 85 percent of Iowa memberships involved no benefit use. The judge noted that virtually all “member” consumers brought to the court’s attention had “no idea” how they became members.
The court found numerous violations of Iowa law. Among them, the court ruled that it was unfair and deceptive to lure consumers into trial memberships by holding out $25 gift cards or other premiums, and then set up obstacles designed to frustrate and delay efforts to redeem the premiums – a practice the company referred to as “breakage.”
The court ruled that one form of this practice, called “double breakage” because it involved two separate hurdles, was especially “egregious.” Tuesday’s testimony indicated that the company had abandoned certain breakage practices condemned in the court’s ruling, including double breakage, nationwide.
“This is great news for consumers,” said Attorney General Tom Miller. “The court got it right in condemning these practices, as they were cheating hundreds of thousands of consumers in Iowa, and many millions nationwide.”
In Tuesday’s hearing the company official also testified that the operation had stopped the online practice of selling two “bundled” memberships with one click of the mouse, but then requiring consumers to make two different calls to cancel. “This bundling scheme resulted in consumers continuing to be charged for memberships they thought they had cancelled,” Miller said. “Good riddance to it.”
Tuesday’s testimony was part of the remedies phase of the 2006 consumer fraud lawsuit. The suit alleged that Vertrue and its subsidiaries marketed memberships using a variety of illegal tactics that resulted in months or even years of credit card charges for memberships that Iowans didn’t even know they had. The liability ruling in March found that the practices did violate Iowa law, and Tuesday’s hearing was a follow-up proceeding to determine what refunds and other remedies the court should order for the violations. “We hope to prove that hundreds of thousands of Iowa victims should get refunds,” Miller said.
Miller also noted that after Iowa’s lawsuit against Vertrue the U.S. Senate Commerce Committee had condemned many of the tactics identified in the Iowa litigation. In a November 2009 report that focused on sharp practices in Internet marketing, the Committee charged that Vertrue used “aggressive sales tactics intentionally designed to mislead online shoppers.” In a follow-up report in May 2010, the Committee concluded that after charging for services that consumers “did not use and did not understand they had purchased,” Vertrue “made it as difficult as possible for consumers to get their money back.”
Here are tips to avoid unwanted charges:
- Examine your credit card bill, checking account and phone bills. Unwanted membership charges have even appeared on mortgage statements and invoices from mail order retailers. Watch for unauthorized charges -- and dispute them at once. (Statements often include a toll-free number to call in order to cancel.)
- Remember that even “risk free” trial offers may lead to unwanted charges. Get the details: How do you cancel, and how soon must you cancel to avoid being billed? And remember that they may already have your bank or credit card number to charge you.
- Beware of checks that appear to be refunds or rebates. Fine print on the back of the check or elsewhere in the mailing may try to authorize future charges if you cash or deposit the check.
- Actively monitor your mail. Some mailings warning you that you will be billed unless you cancel may look like the sort of “junk mail” consumers toss without reading.
For more information or to file a complaint, contact the Attorney General's Consumer Protection Division, Des Moines, Iowa 50319. Call 515-281-5926, or outside the Des Moines area, call 1-888-777-4590, toll-free. The Attorney General’s web site is: www.IowaAttorneyGeneral.gov.
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