(DES MOINES, Iowa) Attorney General Tom Miller this week is notifying more than 400,000 Iowans that they are eligible for refunds from a $40 million fund tied to three buying club cases.
The refunds include restitution from last year’s unanimous Iowa Supreme Court decision against defunct Connecticut-based marketing company Vertrue Inc. The refunds also include separate payments from Affinion Group Inc., of Stamford, Connecticut, and Stonebridge Benefit Services Inc., of Plano, Texas.
“In the Vertrue case, the District Court and the Iowa Supreme Court both ruled that the company essentially based its business model on tricking Iowans into paying fees for memberships that most didn’t know they had, they didn’t use and didn’t want,” Miller said. “Now it’s time for Iowans to receive the restitution that they’re rightly entitled to.”
The Iowa Supreme Court found that Vertrue and its affiliates, which had enrolled nearly 864,000 Iowans since 1989, committed consumer fraud and violated Iowa’s Buying Club Memberships Law. “The record is replete with examples of consumers who were unwittingly enrolled in Vertrue’s financial, privacy, and health programs through the use of misleading solicitations and overreaching marketing tactics,” the ruling said.
The memberships, which Vertrue marketed through phone calls, mailings, and the Internet, purported to provide members with various discounts on goods and services. The companies often enrolled consumers who were responding to an offer, such as a cash-back offer or gift card, while making a separate purchase from a different merchant.
Vertrue first enrolled consumers in trial memberships that they had to cancel by a certain deadline. The company then collected monthly membership fees though debit or credit charges that continued until consumers canceled their memberships.
Iowa Supreme Court: Vertrue Sales Pitch “Incontestably Deceptive and Unfair”
In a 2003 recorded phone call the Consumer Protection Division obtained from Vertrue, a company telemarketer offered a 70-year-old Des Moines widow a $25 Walmart gift card if she agreed to accept a buying club trial membership. Vertrue then billed the woman’s credit card for unwanted monthly $14.95 membership charges. Despite the charges, the woman never used the membership and never received the promised gift card.
Based in part on the recording, the Iowa Supreme Court found that Vertrue’s telemarketing solicitations were “incontestably deceptive and unfair.” In its ruling, the Court added, “This unintelligible telemarketing pitch that proceeded at a lightening pace was likely to mislead consumers as to the material terms of the transaction.”
Vertrue Judgment: $40 Million; State Collected $32.6 Million through Appeal Bond
In 2011 a Polk County judge ordered Vertrue to pay nearly $29 million in restitution. Last year, the Iowa Supreme Court raised it to $40 million.
Following the District Court ruling, Miller sought and received a court order that required Vertrue to post a $32.6 million appeal bond. Despite Vertrue’s bankruptcy filing in 2012, the state collected the appeal bond funds.
“Our priorities in these cases were to stop these companies from continuing to take advantage of Iowans, and we also wanted to ensure that Iowans affected by this would someday see at least some restitution,” Miller said. “Now we’re close to reaching that point.”
In October, Affinion Group Inc. and its subsidiaries, Trilegiant Corp. and Webloyalty.com, agreed to pay the state $5.5 million to resolve Miller’s allegations that the company violated state consumer protection laws. The payment included $5 million in restitution to Iowa consumers.
Miller had alleged that the company misled Iowans into signing up and paying for discount membership programs through sponsored “free trials.” Affinion and its subsidiaries run multiple membership programs offering a variety of services such as credit monitoring, roadside assistance, discounted entertainment and discounted travel.
Under the agreement, Affinion and its affiliates were required to change their marketing practices. Affinion did not admit to wrongdoing.
Also in October, a Polk County District Court judge ordered two companies affiliated with JCPenney to pay more than $2.7 million in refunds to tens of thousands of Iowa consumers enrolled in buying club memberships. The case involved JCPenney Direct Marketing Services and Stonebridge Benefit Services Inc. A consent judgment required the companies to comply with Iowa’s Buying Club Law and Consumer Fraud Act. Stonebridge denied liability.
Refund Process Begins with Notice
Based on the companies’ records, the Attorney General’s Consumer Protection Division determined the Iowans eligible for a refund. This week Miller’s office, in conjunction with a Faribault, Minnesota settlement administration company, is sending refund notices to those eligible Iowans. Recipients will be asked to correct and update mailing addresses to ensure delivery of refunds.
“We want Iowans to know that these notifications are legitimate, and payments will follow a few months from now,” Miller said.
Eligible Iowans will receive checks later this year, likely from October through December. Most refunds will range from $5 to $40, but some will be substantially higher. The refund amounts will depend, in part, on the number of consumers on the membership lists who can be located.
Iowans with questions or seeking more information about the refunds can contact Consumer Protection Division Investigator Al Perales:
- Email: Al.Perales@iowa.gov
- Phone: 515-281-6413
- Toll-free (outside of the Des Moines metro area only) 888-777-4590
“Free Trial Offer” & Buying Club Tips
Miller stressed that consumers can best protect themselves from fraudulent charges by reviewing credit card and bank statements carefully, and promptly disputing any unauthorized charges.
- Be wary of trial offers, “free trial” offers, and membership offers. Get the details and ask questions. Will you be billed automatically if you don’t cancel? By when must you cancel? How do you cancel? Will you receive a mail notice? Remember, they already may have your bank or credit card number to charge you.
- Examine credit card bills every month, checking account and debit card statements, other financial accounts, and phone bills. Watch for unauthorized charges, and dispute them at once, in writing.
- Watch your mail and email for notices that you will be billed unless you cancel. These mailings may look like junk mail or spam.
For more information on buying clubs or to file a complaint, contact the Consumer Protection Division through the Attorney General’s website at www.IowaAttorneyGeneral.gov or email directly to email@example.com. Consumers can also call the Consumer Protection Division:
- Toll free: 1-888-777-4590 (outside the Des Moines area only)