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400,000 Iowans eligible for buying club refunds

July 8, 2014
Associated Press

IOWA CITY, Iowa (AP) — More than 400,000 Iowa residents including many seniors who were tricked into signing up for buying club memberships will be eligible for refunds ranging from $6 to more than $1,000, under a landmark consumer fraud settlement announced Tuesday.

Refund notices were mailed Monday to people who unknowingly paid for memberships with Connecticut-based Vertrue Inc. and two other buying clubs over the last 25 years, Iowa Attorney General Tom Miller said. In all, they will be eligible for $40 million in refunds that will be paid out between October and December, he said.

The number of people who enrolled was equivalent to 13 percent of Iowa's 3.1 million population, although some had multiple memberships to programs in which they could buy discounted goods or services. The vast majority of the memberships were never used.

Miller said the victims were deceived into paying recurring monthly charges ranging from $9 to $30 for memberships that they did not want through misleading telephone, mailing and Internet solicitations. Many of the pitches asked them to sign up for a "free trial" or receive a gift card after they had made other, legitimate transactions. Mailings informing customers about their memberships were designed to look like junk mail and were often thrown away. Some customers didn't catch the small charges on their cards, he said.

Richard Schulz, 75, of Des Moines, will receive roughly $1,500 after he unwittingly enrolled in a Vertrue program. Schulz said he was signed up by a telemarketer after ordering another product on the phone in 2005. He said he paid the fees for years because he wasn't checking his credit card statement closely.

"I do feel like I've been duped," he said at a news conference with Miller.

Miller played a recorded phone call in which a Vertrue telemarketer spoke quickly and almost incomprehensively as she offered a widow a $25 Walmart gift card for a buying club trial membership. The company never sent the gift card but instead billed to woman's credit card $14.95 monthly for a membership that she never used.

The refunds are the culmination of Miller's 11-year investigation and prosecution of Vertrue, which was ordered to pay a $40 million judgment after selling 864,000 memberships to 400,000 Iowa residents dating back to 1989. Miller, a Democrat who is known nationally for his consumer protection work, said some other states reached settlements with Vertrue but Iowa was the only one to take it to trial.

The Iowa Supreme Court ruled last year that Vertrue's practices violated the state's buying club and consumer fraud laws. Justices said the company's pitches were confusing for everyone but particularly for the elderly, who were more susceptible to them.

Vertrue's parent company filed for bankruptcy in 2012, but Miller's office has collected a $32.6 million appeal bond the company posted. After the Supreme Court ruling, Miller reached two settlements with others who were accused of misleading customers in similar fashion.

Affinion Group Inc. and subsidiaries paid $5.5 million to settle allegations that it misled Iowa residents into paying for discount programs through "free trials." Two companies affiliated with JCPenney, including Stonebridge Benefit Services Inc., agreed to pay $2.7 million. The companies didn't admit wrongdoing.

Most of the refunds will range from $6 to $40 apiece, but Miller said some will be significantly higher.

Tim Siefer, a 65-year-old retired engineer in Marion, said he was surprised to get a call from Miller's office informing him he would receive $1,200. He said he has no idea what program he signed up for, how much he was paying per month and for how long.

"This is good news for me, sure," he said, "but it's great news for a lot of people."

 
 

 

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