CEDAR RAPIDS, Iowa — As a real estate broker, Claudette Roby wanted to maintain a presence, so she “signed up for this program and that program, whatever promised to push me to the front of the line.”
What she didn’t realize, however, was that she had signed up for buying clubs that Attorney General Tom Miller said were “tricking Iowans into paying fees for memberships that most didn’t know they had, they didn’t use and didn’t want,” Attorney General Tom Miller said in Cedar Rapids Tuesday.
Miller announced that more than 400,000 postcards were mailed Monday to Iowans notifying them they may be eligible for refunds from a $40 million fund tied to three buying club cases.
“I was stunned when I got the call from the Attorney General’s Office,” Roby said at Miller’s news conference. “You know, we all like to think we’re pretty savvy … but when they told me, I said ‘Wow,’ how did that happen.’”
Roby said the Attorney General’s Office estimated her refund at about $5,000. Miller said one Iowan is due a refund of about $8,000, but most range from $5 to $40.
The refunds include restitution from an Iowa Supreme Court decision last year against defunct Connecticut-based marketing company Vertrue Inc., according to the Iowa Attorney General Office. 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,” Attorney General Tom Miller said.
“Now it’s time for Iowans to receive the restitution that they’re rightly entitled to,” he said. According to Miller, 400,000 Iowans had 864,000 buying club memberships. Iowans who receive Vertrue refunds will “likely be made whole,” but refunds from the other buying clubs are closer to 30 percent, which he called typical.
Based on information he has received, the $40 million settlements is more than the combined settlements in other states.
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 court 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.
Consumers were enrolled in trial memberships that unless they canceled by a certain deadline. If not, the company then collected monthly membership fees though debit or credit charges that continued until consumers canceled their memberships.
In 2003, the attorney general’s Consumer Protection Division recorded a 70-year-old Des Moines woman being offered a $25 Wal-Mart 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.”
“This unintelligible telemarketing pitch that proceeded at a lightening pace was likely to mislead consumers as to the material terms of the transaction,” the court said.
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 that ruling, Miller 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.
In October, Affinion Group Inc. and its subsidiaries agreed to pay the state $5.5 million, including $5 million in restitution to consumers, to resolve allegations that the company violated state consumer protection laws.
Under the agreement, Affinion and its affiliates were required to change their marketing practices. Affinion did not admit to wrongdoing.
Another case involved JCPenney Direct Marketing Services and Stonebridge Benefit Services Inc. They agreed to pay $2.7 million in refunds for tens of thousands of Iowans enrolled in buying clubs. A consent judgment required the companies to comply with Iowa’s Buying Club Law and Consumer Fraud Act. Stonebridge denied liability.
Based on the companies’ records, the Attorney General’s Consumer Protection Division determined the Iowans eligible for a refund and this week is sending refund notices to them. 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. 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 the settlement administrator directly at www.IowaBuyersClubRefunds.com, (866) 989-8782, or Iowa Buyers Club Refunds, P.O. Box 1923, Faribault, MN 55021-1944.
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