Retailer settles FTC suit over PCs

The Baltimore Sun

Woodlawn-based computer retailer BlueHippo, whose advertisements targeting customers with bad credit drew the attention of state and federal investigators, has agreed to pay consumers up to $5 million to settle Federal Trade Commission charges that it improperly took money from customers without providing the promised electronics.

Neither BlueHippo Funding LLC nor the related BlueHippo Capital LLC admitted wrongdoing, according to company spokesman Tony Applewhaite. BlueHippo will continue to operate, despite probes in several states - including Maryland, where a settlement has been reached - and a class-action lawsuit by customers.

Federal regulators said they were happy with the outcome.

"We think this is monetarily a very good settlement for consumers," said FTC attorney Frank Gorman.

In television and radio advertisements that aired around the country, BlueHippo promised to ship computers to customers after a down payment of $99 to $124, followed by a series of automatic withdrawals from their bank accounts, according to the FTC.

But the deductions began before the company informed consumers that it had a no- refund policy if they canceled before delivery, regardless of the reason, according to the FTC.

"There was a written disclosure that was made to consumers, but in many instances the consumer did not receive it until after their bank accounts were already debited," Gorman said.

The FTC attorney said some buyers paid hundreds of dollars but did not receive the equipment in the promised amount of time.

"Consumers understood that after 13 weeks of payments they would have a computer shipped to them," he said. When the computers didn't arrive, "people stopped making payments because their product was not delivered."

But BlueHippo did not return the money. "Regardless of who breached the contract, they kept the money," Gorman said. "The combination of the way their particular no-refund policy worked was an unfair business practice."

Under the settlement, which must be approved by a federal judge in New York, consumers are eligible for redress if they signed contracts before March 2006, paid money to the company and did not receive their products, according to the FTC. If they have received a refund from BlueHippo, or full restitution through another settlement, they are not eligible. Gorman would not disclose how many consumers are eligible for compensation through the settlement, although the FTC expects that the monetary judgment - at least $3.5 million and possibly up to $5 million - would be enough to fulfill all claims.

After a federal judge issues a permanent injunction, the FTC will begin identifying consumers eligible for compensation through company databases and will mail claim forms to them, Gorman said.

Specifically, the FTC alleged that by failing to ship merchandise in a reasonable time frame or denying consumers the right to cancel and get a refund, BlueHippo violated the FTC's mail-order rule. Officials said the company also might have violated the federal Truth in Lending Act and its regulations by not giving consumers written disclosures before the transactions were made.

The commission also alleged that the company violated the Electronic Fund Transfer Act and its regulations by offering credit on the condition of repayment by preauthorized debits.

The FTC settlement bars the company from misrepresentations in the marketing of consumer equipment requiring more than four periodic payments. In addition, the company must fully disclose terms of refunds, cancellations or exchanges.

The FTC's action does not address one issue that drew criticism at Maryland's settlement last spring and elsewhere - the high cost of the computers. The company charged several times the retail price for the equipment, according to other settlements.

Founded in 2004, BlueHippo now describes a policy on its Web site that gives customers a cash refund within seven days of signing up and store credit for canceled purchases that can be redeemed by purchasing products on bluehippo.com.

BlueHippo topped the list of 25 companies that were the subject of the most complaints to the Better Business Bureau of Greater Maryland last year, said Angie Barnett, president and CEO of the organization.

liz.kay@baltsun.com

The settlement

What happened:

BlueHippo has agreed to pay consumers between $3.5 million and $5 million to settle a Federal Trade Commission complaint that the Woodlawn-based computer retailer took consumers' money without providing the electronics they paid for.

Consumers will receive a claim form from the FTC if they:

Entered into a contract with BlueHippo before March 2006,

Paid money to the company,

Did not receive the products they ordered or a full refund, either from BlueHippo or in other restitution.

Questions:

Call the FTC's consumer response center at 877-382-4357. The federal agency will handle refunds.

For information from Blue- Hippo:

Consumers can e-mail FTCsettlement@BlueHippo.com

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