Md. firm's practices get FTC scrutinyby EILEEN AMBROSE, SUN REPORTER |
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BlueHippo sells electronics to people with poor credit
BlueHippo Funding LLC, a Woodlawn company that sells computers and plasma TVs nationwide to people with poor credit, is under investigation by the Federal trade Commission after being hit with hundreds of consumer complaints in its three years in business. In addition to the federal probe, the Illinois attorney general's office sued the Baltimore County company late last year, Florida has begun an investigation "and, 'last week, two Californians sued BlueHippo and are seeking class action status to represent thousands of consumers.
Launched in April 2003, BlueHippo grew quickly through radio and cable television ads that pitched computers to those without access to traditional credit. Consumers pay through electronic debits to their bank accounts over one year. The company promises to ship merchandise once customers make three months' payments worth hundreds of dollars. Early on, however, consumers began to complain that they didn't get their computers and weren't able to get refunds, and complaints have persisted. The Better Business Bureau of Greater Maryland says it has logged 799 complaints in three years, making BlueHippo their most complained-about company. "We get calls every day," said Kerri Kelly, public relations manager .with the BBB in Baltimore.
In August, the FTC subpoenaed Wachovia Bank for records relating to BlueHippo, according to a letter from FTC Secretary Donald S. Clark posted on the agency's Web site. BlueHippo, according to the letter, said the records were irrelevant to whether it had violated laws against deceptive mail or telephone ordering, and it tried unsuccessfully to quash the order. As recently as early March, the FTC was collecting evidence from consumers.
FTC officials say they don't comment on whether an investigation is taking place. But Clark, in his letter, stated, "BlueHippo's claim that this investigation is limited to issues related to the 'timing of sales and shipments and delivery... is simply wrong."
BlueHippo's spokesman, Michael Waldron, would not comment about an investigation but said, "If an appropriate regulatory agency has a question with regard to the company's practices, BlueHippo fully cooperates with them in the interest of clearing up any concerns they may have."
BlueHippo said it caters to consumers earning an average of $40,000 but with a history of credit problems. The typical customer's credit score is 455, a level considered extremely risky, the company said. The number of complaints is small compared with the 160,000 customers served in the past three years, Waldron said.
"The company offers consumers with credit challenges the opportunity to purchase very expensive electronics when ho other retailer or lender will," Waldron said.
Critics complain that BlueHippo prices its computers at three to five times the retail cost, 30 by the time customers get their computer they've already paid more than it's worth.
The higher prices reflect the higher cost of doing, business with poor credit risks, the company said. It says more than 40 percent of its customers don't complete the payment plan once they receive the computer. About one-third give false bank account information, or the first payment is returned for insufficient funds, the company said.
ne dissatisfied customer is Stacey Simms, who responded last year to BlueHippo's pitch. "I said, 'It must be legitimate. They have a TV commercial and are on the radio all the time,'" said Simms, a clerk with the . Prince George's County vital records office. She said she paid about $125 upfront, and $84 was debited from her bank account every two weeks. Simms said she was initially told she would get a computer after her first payment. But the delivery dates kept changing, extending out to three or four months, she said. She complained to the Better Business Bureau. She also stopped payments despite BlueHippo's no-refund policy. "It was a hard decision. They had $500 of mine that I would never see again," she said.
Simms told the company she was reporting it to the Better , Business Bureau. The next day, me company told her the computer had been shipped. She has the computer, but the experience has left her angry. "I was noticing they still have their commercials. How are they surviving?" she said.
After receiving 15 complaints, the Illinois attorney general sued BlueHippo and its president, Joseph K. Rensin, in November, accusing them of deceptive sales tactics. The lawsuit seeks to bar them from making sales in the state. "It seemed that these consumers were very much taken advantage of. That's why we acted quickly," said Melissa Merz, a spokeswoman for the Illinois attorney general. Florida's attorney general's office, with 17 complaints against BlueHippo, launched an investigation in December.
FTC looks at BlueHippo
Stacey Simms, of Fort Washington, says she paid more than $500 to BlueHippo but didn't get the computer she ordered until she told the company she was complaining to the BBB.
Maryland's attorney general's office has received 257 complaints about BlueHippo but has not filed a lawsuit. Most of the complaints are from out of state, and 82 were resolved through mediation. Spokesman Kevin En-right said his office can't discuss any action it has taken or will take against BlueHippo;
BlueHippo's practices violate state consumer laws across the country, said David Marshall, a Washington consumer lawyer representing the Californians suing BlueHippo.
"State-level regulators should have taken action against this company long ago and prevented them from cheating so many people as they have out of their money," he said "That's the reason we are doing this lawsuit."
Filed in the US. District Court in California, the lawsuit seeks class-action status to represent thousands of California consumers who never received their computers arid potentially lost millions of dollars, Marshall said.
BlueHippo claims to sell top-of-the-line computers when in reality the machines are basic or outdated models, the lawsuit states. Consumers can end up paying nearly $2,000 for a computer that sells for $400 or less in the stores, the suit alleges.
Customers are not told of critical sales terms, such as the price of the computer. And those who back out of the deal never get a computer or the return of their money, the lawsuit states. "I can't think of another situation where people make weekly payments for a number of months then, if they default, they don't get their money back," Marshall said. Consumers would be better off buying a computer on a retail lay-away plan, he said.
Kelly Cannon, a medical assistant for the Sacramento County Sheriffs Department, said she saw BlueHippo's TV ad last year and liked die offer of low payments and delivery in weeks. BlueHippo debited $99 from her checking account upfront and arranged to withdraw $100 every two weeks.
But when the sales agreement arrived for Cannon's signature, the terms were difficult to understand and she complained to the company about its misrepresentations, the lawsuit states. She agreed to sign the agreement, though, when a BlueHippo representative told her she would forfeit the money she had already paid if she didn't sign. The lawsuit states that the computer BlueHippo proposed to sell Cannon for $1,970 was available directly from the manufacturer for less than.$500.
Blue Hippo also kept switching her delivery date, Cannon said. Finally, when a date was set, Cannon said, she stayed home from work to wait for the computer that never came. She continued to complain to the company. In the end, she never received a computer or the return of the $600 she had paid. She wrote to the company's president, asking for her money back. She also wrote to top Maryland officials.
"The reason I did, I was so upset. If [BlueHippo] can do this to me, how many other people are they doing this to?" she said. "They need to be stopped."
The FTC's New York office asked this month for Cannon's statement for its investigation. BlueHippo's Waldron said the company won't comment on the specifics of the lawsuit. But BlueHippo "vigorously disagrees with the premise and assertions in the complaint," he said.
