For Release: 11/12/2009
FTC Lodges Contempt Charge Against BlueHippo
Company Pocketed More Than $15 Million From Consumers Last Year, But Almost
None Received a Computer
The Federal Trade Commission has asked a federal court to issue a contempt
order against BlueHippo, a company that collected more than $15 million from
consumers based on claims that it would finance their purchases of new
computers, but delivered neither the financing nor the financed computers, in
violation of a 2008 court order. The FTC alleged that less than one percent of
consumers who signed up with BlueHippo received the financed computers they
applied for, and undisclosed conditions to redeem “store credits” were rigged to
discourage consumers from using them.
In a contempt motion lodged with the court today, the FTC charged that
BlueHippo has flouted a settlement reached with the agency last year, continuing
to deceive thousands of financially strapped consumers with phony promises that
it would help them purchase a computer even if they have credit problems. The
FTC also is asking the court to order BlueHippo to compensate injured consumers
and bar BlueHippo from similar conduct in the future.
“Years of broken promises by BlueHippo have left consumers seeing red,” said
FTC Chairman Jon Leibowitz. “We’re putting companies like this on notice: If you
mistreat consumers and thumb your nose at the courts, we will hold you
accountable.”
The FTC reached a settlement with Baltimore-based BlueHippo in April 2008
that required the company to pay $3.5 million for consumer redress and barred
the defendants from further deceiving customers. According to the FTC’s 2008
complaint, BlueHippo Funding, LLC and affiliate BlueHippo Capital, LLC offered
to extend credit to consumers to finance purchases of personal computers and
other consumer electronics with down payments of $99 to $124, and a year of
weekly or bi-weekly payments ranging from $36 to $88. BlueHippo promised to
deliver the product once the consumer made 13 weekly payments. But most
consumers did not receive the computers they ordered in the time promised, even
after they had made 13 weeks of payments, the Commission alleged. The Commission
charged that BlueHippo’s marketing tactics were deceptive, and violated the FTC
Act and other federal credit statutes.
Even after this settlement order was entered by the court, BlueHippo
continued to deceive consumers, according to the FTC. The company aggressively
marketed itself as a computer finance company and spent the rest of 2008 signing
up customers and taking their money, but failing to provide them with financed
computers. The FTC’s contempt motion alleges that between April and December of
2008, more than 35,000 customers contracted for BlueHippo’s computer financing
deal. But the company provided, at most, a single financed computer, failing to
provide financed computers even for 2,477 customers who managed to meet the
companies’ conditions. Complaints about the company poured into the Better
Business Bureau. On top of all that, BlueHippo failed to submit a report to the
FTC showing how it was complying with the settlement, as required by the
order.
Finally, in April, 2009, after the FTC notified the court that BlueHippo was
violating the settlement, the company began ordering thousands of computers.
Even so, the FTC alleges that BlueHippo failed to order computers for 1,015 of
the 2,477 consumers who had qualified for financing by making 13 consecutive
payments and completing the required paperwork. For the 1,462 consumers who
finally received a computer, BlueHippo did not even order – let alone ship – the
computers within the three- to four-week time frame the company had advertised.
On average, it took about six months between the time these consumers qualified
for their computers and the time BlueHippo ordered the machines, according to
the FTC’s contempt motion.
The FTC’s contempt motion also charged that BlueHippo failed to disclose key
aspects of its refund policy. In particular, the company promised that while
consumers who canceled their order after seven days could not obtain cash
refunds, they could get “store credit,” which could be used to buy desktop
computers, laptops, monitors, software, and televisions. But it failed to tell
consumers that they would have to send a money order to cover undisclosed
shipping and handling fees, as well as taxes, even if they had more than enough
store credit to cover these costs – and that they could only order one item at a
time.
The contempt motion against defendants BlueHippo Funding, LLC; BlueHippo
Capital, LLC; and Joseph Rensin was filed in the U.S. District Court for the
Southern District of New York.
The Federal Trade Commission works for consumers to prevent fraudulent,
deceptive, and unfair business practices and to provide information to help
spot, stop, and avoid them. To file a complaint in English or Spanish, visit the
FTC’s online Complaint
Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints
into Consumer Sentinel, a secure, online database available to more than 1,500
civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s
Web site provides free information on a variety of consumer
topics.
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MEDIA CONTACT:
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Peter Kaplan
Office of Public Affairs
202-326-2334
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STAFF CONTACT:
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James A. Kohm
Bureau of Consumer Protection
202-326-2640
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(BlueHippo.wpd)
(FTC File No. X080019)
