FTC Files Contempt Complaint Against Computer Financing Firm

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The U.S. Federal Trade Commission has asked a federal court to issue a contempt order against electronics financing firm BlueHippo after it allegedly violated a 2008 court order requiring the company to make good on promises to deliver computers to customers.

Even after the 2008 court order, BlueHippo has delivered computers to less than 1 percent of the people who signed up for financing, and more than 1,000 people who made all the payments did not receive a computer, the FTC said Thursday. Customers have paid BlueHippo more than US$15 million, and undisclosed conditions to redeem "store credits" were rigged to discourage consumers from using them, the FTC said.

The FTC on Thursday filed a contempt motion with he U.S. District Court for the Southern District of New York, asking the court to order BlueHippo to repay consumers and bar the company from similar conduct in the future.

"BlueHippo is a company with a business model based on deceit," FTC Chairman Jon Leibowitz said in a video on the agency's site. "They told consumers with poor credit they were going to help finance computers, and they didn't do it. And then when we put them under order, they still didn't do it."

The voicemail box for BlueHippo's media contact was full Thursday afternoon. The company did not immediately respond to a request for comment filed through a form on the BlueHippo Web site.

The FTC, in its contempt order request, charged that BlueHippo has flouted the 2008 settlement reached with the agency last year, continuing to deceive thousands of financially strapped consumers with phony promises that it would help them purchase a computer even if they have credit problems. The FTC also is asking the court to order BlueHippo to compensate injured consumers and to bar BlueHippo from similar conduct in the future.

"Years of broken promises by BlueHippo have left consumers seeing red," Leibowitz said. "We're putting companies like this on notice: If you mistreat consumers and thumb your nose at the courts, we will hold you accountable."

The FTC reached a settlement with Baltimore-based BlueHippo in April 2008 that required the company to pay $3.5 million for consumer redress. BlueHippo Funding and affiliate BlueHippo Capital offered to extend credit to consumers to finance purchases of personal computers and other consumer electronics with down payments of $99 to $124, and a year of weekly or biweekly payments ranging from $36 to $88, the FTC said in the 2008 complaint.

BlueHippo promised to deliver the product once the consumer made 13 weekly payments. But most consumers did not receive the computers they ordered in the time promised, even after they had made 13 weeks of payments, the commission alleged. BlueHippo's marketing tactics were deceptive and violated U.S. law, the FTC said.

Even after the 2008 court order, BlueHippo failed to deliver computers to customers, the FTC said. The company "aggressively" marketed itself as a computer finance company and spent the rest of 2008 signing up customers and taking their money, the agency said. More than 35,000 customers entered into a financing deal with the company, and BlueHippo failed to provide computers for 2,477 customers who met all its conditions, the FTC alleged.

The Better Business Bureau received many complaints about BlueHippo, and the company failed to file a report to the FTC showing how it was complying with the settlement, the FTC said.

In April, after the FTC notified the court that BlueHippo was violating the settlement, the company began ordering thousands of computers, the FTC said. But the company did not order computers for 1,015 of the 2,477 customers who had qualified for financing by making 13 consecutive payments and completing the required paperwork.

For the 1,462 consumers who finally received a computer, BlueHippo did not order or ship the computers within the three- to four-week time frame the company had advertised. On average, it took about six months between the time these consumers qualified for their computers and the time BlueHippo ordered the machines, the FTC said.

The FTC's contempt motion also charged that BlueHippo failed to disclose key aspects of its refund policy. The company promised that while consumers who canceled their order after seven days could not obtain cash refunds, they could get "store credit," which could be used to buy desktop computers, laptops, monitors, software and televisions. But it failed to tell consumers that they would have to send a money order to cover undisclosed shipping and handling fees, as well as taxes, even if they had more than enough store credit to cover these costs, the FTC said.

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