Company must divulge the true cost of its financing offers
SEATTLE – Pink elephants may go mysteriously unnoticed, but not BlueHippo. The company, which pitches personal computers to those with less-than-perfect credit, was the target of a federal lawsuit resolved last year. BlueHippo made a splash again when the Washington Attorney General’s Office announced today that it, too, reached a settlement.
“BlueHippo’s misleading marketing tactics and cancellation policies left many consumers seeing red,” said Assistant Attorney General Shannon Smith, of the office’s Consumer Protection Division. “Our settlement includes a provision to prevent the company from representing that its prices are less than or equal to those offered by product manufacturers.”
BlueHippo Funding, LLC, of Baltimore, Md., and BlueHippo Capital, LLC, of Carson, N.V., admitted no wrongdoing as part of the state’s settlement submitted today in King County Superior Court but agreed to a list of restrictions on how they conduct business in the future.
The defendants will pay $25,000 in attorneys’ fees and legal costs and offer refunds to qualifying Washington consumers, including some who may not have qualified for restitution under last year’s Federal Trade Commission settlement. A $25,000 civil penalty was suspended provided the defendants comply with the settlement terms.
BlueHippo targets consumers who are unable to obtain credit from conventional sources. Consumers who order and finance products such as computers and televisions through BlueHippo are charged several hundred dollars more than the manufacturer’s suggested or retail price. They pay an activation fee of typically $99. Consumers must make several payments before the item is shipped and additional payments before they officially own the merchandise.
“The company’s true colors became apparent once consumers tried to cancel their shipments,” Attorney General Rob McKenna said. “Some were charged a $175 cancellation fee and others lost the payments they had already made.”
Since December 2005, the Attorney General’s Office has received 28 complaints from Washington residents concerning BlueHippo.
The state’s complaint accused BlueHippo of violating Washington’s consumer protection and retail installment sales laws by failing to fill orders or offer timely refunds, misrepresenting that its merchandise is affordable, charging excessive cancellation fees and neglecting to include legally required information about the product’s cost in its retail installment contracts.
The Federal Trade Commission reached a settlement with the defendants in February 2008 concerning similar issues. The FTC charged that BlueHippo debited payments from customer bank accounts without first telling consumers they couldn't receive refunds and violated the federal Mail Order Rule. The agreement included up to $5 million in restitution for consumers who ordered products before March 2006 but received neither the merchandise nor a refund.
Washington’s agreement requires BlueHippo to properly disclose all material terms and conditions of its sales and financing offers, including its cancellation policies. The company agreed to inform customers when orders will be shipped. If no shipping date is specified, then the company must have a reasonable basis to expect deliveries within 30 days.
Washington’s settlement provides restitution for the following consumers:
- Consumers who placed properly completed orders through BlueHippo for merchandise that hasn’t shipped are eligible to receive their choice of 1) a full refund of the total amount paid, including any termination fee, 2) BlueHippo fulfills the order or offers substantially similar merchandise if the original item is no longer available, or 3) BlueHippo store credit of 125 percent of the original purchase price.
- Consumers who have met all contractual obligations to receive free merchandise offered with purchase will receive the promised item or a similar replacement. However, the company is not required to ship free items to consumers who failed to make required payments after receiving purchased products.
Washington consumers who have questions about the settlement can contact the Attorney General’s Consumer Resource Center at 1-800-551-4636 between 10 a.m. and 3 p.m. weekdays.
BlueHippo Consent Decree
Media Contact: Kristin Alexander, Media Relations Manager – Seattle, (206) 464-6432