An Iowa court has ruled that Vertrue, a company with a long history of marketing so-called 'buying club memberships,' deceived Iowa residents to the tune of $36 million over the last 20 years.
"Our jaws dropped, too, when we discovered the numbers," said Iowa Attorney General Tom Miller, who filed the consumer fraud lawsuit that led to the court's decision. "We learned during the litigation that, as of mid-2009, 497,683 Iowans had been enrolled in 863,970 buying club memberships offered by Vertrue over two decades."
Typical Vertrue buying club "memberships" cost $9.95 to $19.95 per month, with charges usually made to consumers' credit card or bank accounts. The memberships purport to provide discounts or savings on books, music, clothing, home improvement items, entertainment activities, dining out, and fashion and fitness products.
"We filed the lawsuit because consumers consistently told us they didn't even know they were members," Miller said. "We alleged Vertrue's illegal sales practices resulted in a vast number of Iowans' credit cards being charged, sometimes repeatedly, for memberships most of the Iowans didn't even know they had and never used."
The state lawsuit, which alleged violations of the Iowa Consumer Fraud Act and Iowa's Buying Club Law, was tried Oct. 26-Nov. 5, 2009, in a bench trial before Judge Robert Hutchison, who issued a 62-page ruling late last week finding that Vertrue and its subsidiary companies, Adaptive Marketing LLC and Idaptive Marketing LLC, were liable for consumer fraud.
At it a long time
Hutchison ruled that over two decades Vertrue had used deceptive and unfair techniques to enroll consumers in memberships and charge their credit cards, often without the consumers' knowledge. Consumers often made monthly or annual payments for memberships they were not aware of -- and sometimes kept paying for years.
"Judge Hutchison's well-reasoned decision is a great benefit to Iowa consumers," Miller said. "We have been litigating this case for four years, and it is gratifying that the judge established such an important precedent," he said.
In this decision, Hutchison determined "liability" -- that the Vertrue companies violated Iowa consumer protection laws. Next he will determine the "remedy," such as restitution or penalties, in a separate proceeding to be scheduled soon.
At one point, one of Vertrue's "membership" programs, Simple Escapes, was among the biggest generator of complaints to ConsumerAffairs.com. Consumers were particularly infuriated because they could not find a way to cancel the membership. Many were enrolled by third party companies that shared billing information with Vertrue.
Hutchison noted that Vertrue's total Iowa membership revenues over a 20-year period exceeded $36 million, even after previous refunds to consumers were subtracted.
"We will be seeking restitution for consumers and penalties for Vertrue in the next phase of this case," Miller said.
