Vertrue To Pay $30 Million To Iowa Consumers

For years, Vertrue has operated a number of "buying clubs," sold to consumers through negative option marketing, often without them being aware of it.

Now, the company has been ordered to pay more than $30 million in restitution and penalties to consumers in Iowa. The state's attorney general, Tom Miller, went to court and successfully argued that Vertrue violated Iowa's buying club law and engaged in deceptive and unfair practices over the last couple of decades.

The $32.6 million ruling includes $29.8 million in consumer restitution, $2.8 million in civil penalties, and $725,000 in costs and fees. Vertrue may appeal the court's ruling.

Nearly 20 years

Since 1993, the court found, Vertrue unlawfully marketed 639,721 "memberships" in discount programs to Iowans.  These buying club "memberships" typically cost $9.95 to $19.95 per month, with charges usually made to consumers' credit card or bank accounts.  Consumers were supposed to use their "membership" to earn discounts on travel, entertainment, and other products and services, but few did.

In fact, the court found that 90 percent who ended up with Vertrue memberships would have cancelled within the required three-day cancellation window, had they known to do so.

During the middle years of the last decade, Vertrue was enormously successful, linking up with many well known retailers and websites, who offered Vertrue’s membership programs as part of a “loyalty” program. In other words, the companies offering Vertrue products thought they were doing their customers a favor.

Actually, it usually turned out poorly for the consumer. At the end of transaction, the consumer was asked if they would like a “free trial” in a discount program. The consumers was supposed to be informed that after the trial, they would be enrolled in an ongoing membership program and their credit card would be charged $9.95 or so a month.

Often, this detail was left out. Instead, outraged consumers found unexplained charges on their credit card bills and had difficulty in canceling the program.

Duped

"This is an outstanding outcome for the hundreds of thousands of Iowans who were duped by this company and its deceptive practices," Miller said. "I am elated at this decision that will grant Iowans the restitution they deserve."

Miller filed the lawsuit in 2006. A judge ruled last March that Vertrue violated the state's Consumer Fraud Act and Buying Club Law. Miller says today's judgement is the latest consumer protection verdict ever awarded in Iowa in a case filed by the attorney general.

Vertrue was once known as MemberWorks, Inc. and operates subsidiaries, including Adaptive Marketing, LLC and Idaptive Marketing, LLC.