Tens of thousands affected; none of 20 surveyed wanted or used memberships
(DES MOINES, Iowa) A Polk County judge Thursday ordered two companies affiliated with JCPenney to pay more than $2.7 million in refunds to Iowa customers who were enrolled in buying club memberships.
District Court Judge Richard G. Blane II approved a consent judgment against JCPenney Direct Marketing Services, LLC (“JCPenney”) and Stonebridge Benefit Services, Inc. (“Stonebridge”), both of Plano, Texas. The judgment resolves a consumer fraud lawsuit that Attorney General Tom Miller filed in August of 2011 against Stonebridge, an AEGON company. JCPenney was added as a Defendant in March of 2013.
“Our lawsuit alleged that these defendants repeatedly violated Iowa law over the course of many years by enrolling thousands of JCPenney customers into membership programs, and then charging their credit cards repeatedly for programs many consumers didn’t even know they were members of,” Miller said.
How it Worked
According to Miller, the membership charges were typically made to a credit card or debit card that a consumer had used to make a purchase from JCPenney – often a JCPenney card. Miller said that enrollment into a free trial membership, coupled with a negative-option arrangement that required a consumer to affirmatively cancel to avoid charges, spelled losses for a host of Iowans.
The defendants enrolled tens of thousands of Iowans in several different membership programs, including PlanPlus, MotorPlus, BackPorch Home & Garden, Leisure Plus, Fun Family Rewards, Everyday Bargains, Perfect Home, Savings Solution, and Savings2Go, among others.
“When Iowans placed an online or phone order for a JCPenney product, too often they would end up saddled with ongoing monthly charges for a membership they didn’t want,” Miller said. “These charges would go on and on until the consumer stepped forward to cancel. Many consumers who didn’t notice the charges, or who misinterpreted them, suffered considerable losses.”
As an illustration of how Iowans were affected by what Miller called the “stealth marketing” of memberships by JCPenney and Stonebridge, Miller noted that his office contacted twenty Iowans who had been identified as among the longest-term paying members of certain discount shopping memberships.
“Such long-term members would be expected to be happy campers, people who were paying membership fees each month because they liked their memberships,” Miller said. “Instead, we were astonished to find that none of the twenty wanted or had used their memberships, and fully nineteen of them were not even aware that they had been enrolled and were being charged each month.”
The consent judgment orders JCPenney and Stonebridge to comply with Iowa’s Buying Club Law and Consumer Fraud Act in connection with any future sales of its memberships. The judgment also requires the defendants to pay $2,738,448 for refunds to consumers, and an additional $164,375 to the state for consumer fraud enforcement.
While agreeing to pay more than $2.9 million to settle the case, the defendants denied liability.
Stonebridge Fined During Litigation
Miller said that Stonebridge’s conduct of the litigation was marked by obstructionist tactics, violations of court orders, and even a court-imposed sanction. “A vigorous defense by those accused of consumer fraud is to be expected, but Stonebridge’s ill-advised maneuvering in this case stands out,” Miller said. “It’s not every day that a district court fines a defendant $29,500 for violating the court’s order to produce documents, as Stonebridge was fined in this case.”
Miller said that this litigation stood out in other ways as well. “After many months of identifying witnesses to the court as company employees, Stonebridge did a 180-degree turn and announced that in fact it had no employees whatsoever,” Miller said. “We regarded this as abusive conduct that could have led to additional sanctions, had the defendants not agreed to settle the case by paying almost $3 million.”
Consumers to be Contacted about Refunds
Miller said that these companies are providing a list of Iowans who were charged for memberships, so consumers do not need to contact his office. Refund checks are expected to be mailed out later this year or in early 2014.
“Free Trial Offer” & Buying Club Tips
According to Miller, the first line of protection is in the hands of consumers themselves: “By carefully monitoring charges to your credit card and bank accounts, you can be on top of any unauthorized charges, and get them stopped before the losses mount.”
Be extremely 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 your credit card bills every month, your 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.
- Beware of cashing a check that comes in the mail with a “free trial offer.” The fine print may obligate you to future payments.
To file a complaint with the Consumer Protection Division:
Phone: 515-281-5926 or 888-777-4590
Mail: Consumer Protection Division, Hoover Building, Des Moines, Iowa 50319