Subprime PC retailer coughs up $5m fine
BlueHippo tramples on the poor
BlueHippo bills itself as a company that has "helped thousands of Americans with limited financing options purchase computers, flat screen televisions, and other electronic equipment". This may be true. But it's also worth noting that BlueHippo will soon fork over as much as $5m to settle Federal Trade Commission charges that an unspecified number of Americans have paid the company hundreds of dollars in exchange for absolutely nothing.
Since its inception in 2003, BlueHippo has aimed nationwide television and radio ads at people with "less than perfect credit, bad credit, no credit," offering a shortcut to certain electronic goodies. With a quick phone call to the company, credit-challenged Americans could arrange for the delivery of a brand new PC simply by agreeing to a roughly $100 down payment and a year's worth of weekly or biweekly payments somewhere between $36 and $88.
During such calls, customers were told that their PCs wouldn't arrive until the company lifted thirteen weekly or seven biweekly payments straight from their bank accounts. But prior to March 2006, the FTC says, BlueHippo wasn't exactly upfront about its refund policy - which didn't allow refunds.
"The company did not adequately disclose that if you stopped making payments - for any reason whatsoever - you didn't get any of your money back," Frank Gorman, an FTC attorney who worked on the case, told The Reg. "This is not what consumers would reasonably expect. These non-refunded payments were in fact consumer injury."
BlueHippo did make some sort of over-the-phone statement about its refund policy. But Gorman says it was "wholly inadequate." "It was rushed. It was confusing. It was not enough to overcome what people expect from a situation like this."
The company also sent customers a printed sales verification form that included a disclosure - and customers were required to sign and return it. But, the FTC alleges, this form didn't arrive until money had already changed hands.
"People were told to look out for this sales verification form," Gorman says. "But when it showed up, payments had already been debited from their back accounts. They learned that payments were non-refundable after they'd already made them."
Blue Hippo's Blue Hippo
As Gorman points out, BlueHippo changed its policies in March 2006. But thanks to today's settlement, customers that predate this policy change now have to a right to refunds as well. The company will fork over at least $3.5m, and the total pay out could reach $5m.
Under the settlement, BlueHippo is also required "to stop collecting money from purchasers who are entitled to redress, to stop furnishing derogatory information about such purchasers to credit reporting agencies, and to notify any agency to which they have provided such information that the person’s account is in good standing."
The FTC won't tell us how many BlueHippo customers are entitled to redress payments. But as of June 2007, more than 1,400 people representing all 50 states had complained to the Better Business Bureau.
Whatever BlueHippo ends up paying, the company is "very excited" about its settlement with the FTC. "The FTC staff was fair and professional, and after months of hard work we have fashioned a deal that satisfies all parties," said a canned statement from Andrew Campbell, BlueHippo general counsel. "We are very excited about this settlement. The FTC is our only national regulator and the country's most important consumer advocate."
The company wouldn't tell us why it's called BlueHippo. ®
Why do people fall for this?
Because here in the US we have a lot of low income people who buy into everything the media and ad agencies tell them: "You ain't nothing unless you drivin' an Escalade", "Get the kind of car you DESERVE" (despite the fact you work at McDonalds) "Get the kind of house you DESERVE!"(despite the fact you're on food stamps), "You NEED a computer!"
In short? Because people are stupid enough to fall for these scams. Look at how our housing market is taking a shit, thanks to unscrupulous lenders giving out interest-only mortgages and people who have no concept of "consequences". In one of my sociology classes, the professor lectured on a study that showed that 76% of people who receive welfare checks will spend all the money within 4 days. She somehow managed to turn this into being my fault, for being a white middle (lower) class male, that poor people have no idea how to save money, and will often spend what's left in the grocery lines on the impulse items by the register.
Those are the kinds of people too stupid to stop for one second and do the simple on math on how much a Blue Hippo computer will cost them. Paris, because she did the same thing on the Simple Life (though she has the $$$ to back it up)
Let me get this straight
You pay for an item before you get it and again once you have it?
And I thought Brighthouse were bad!
Why do people fall for this? Don't they have savings accounts (or piggy banks) in the USA?
What's really scary...
...is that they're selling some pretty high end kit (well, for 2005 at least). For Joe Average home user to do email/internet, have the kids do some homework, maybe play a few games, a HP xw9300 Workstation is, frankly, overkill. $94.99 for 52 weeks = $4939.38 - I bet HP would love to sell a few for that!