Blue Hippo Lawsuits

Two interconnected companies -- BlueHippo Funding, LLC and BlueHippo Capital, LLC -- have agreed to pay up to $5 million to consumers who have filed complaints about the companies' computer layaway scheme, exposed in a January 2007 investigative seriesby ConsumerAffairs.com's Joe Enoch.

The payments are part of a settlement with the Federal Trade Commission, which charged that the companies violated federal consumer protection laws.

Several states have also taken action against Blue Hippo. In May 2007 Maryland's Attorney General extracted a $1 million settlement from the firm.

Blue Hippo 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 bi-weekly payments ranging from $36 to $88. In nationwide television and radio commercials, and on their Web site, the defendants touted the ability of consumers with "less than perfect credit, bad credit, no credit" to finance the purchase of a computer. But in fact, many consumers who ordered products paid hundreds of dollars and received nothing in return, according to consumers who complainedto ConsumerAffairs.com.

Automatic debits

According to the FTC complaint, Blue Hippo required consumers to agree to a series of automatic, periodic debits from their bank accounts to purchase their products, promising that they would deliver the product once the consumer made 13 weekly, or seven bi-weekly, payments.

In many instances, the defendants debited consumers' accounts without first disclosing that consumers could not get a refund even if they cancelled before delivery of the product, regardless of the reason for cancellation.

Consumers who ordered products by calling a toll-free number were told that they would receive a "shipping verification form" with sale terms and shipping information, and that they had to sign and return the form to ensure product delivery, the complaint says. The form contained terms that were not disclosed previously, including disclosures regarding finance terms.

The defendants often failed to provide the forms and revolving account agreements before they debited accounts, so the finance terms and refund policy were not disclosed before consumers started making non-refundable payments.

The FTC says many consumers did not receive the merchandise they ordered or refunds. The agency took action, accusing Blue Hippo of failing to clearly and conspicuously disclose their policy of not providing refunds before debiting accounts, in violation of the FTC Act, and giving consumers no opportunity to make a timely and informed decision about whether or not to risk the potential loss of advance payments.

The defendants also allegedly failed to deliver the products after consumers made 13 weeks of payments, as promised during the sales call, also in violation of the FTC Act.

Right to cancel

For good measure, Blue Hippo was charged with violating the FTC's Mail Order Rule by failing to ship merchandise in a timely manner or give consumers the right to cancel and receive a refund. They allegedly violated the Truth in Lending Act (TILA) and Regulation Z by failing to make certain written disclosures before a transaction is made under an open-end consumer credit plan, and they allegedly violated the Electronic Fund Transfer Act (EFTA) and Regulation E by conditioning the extension of credit to consumers on repayment by preauthorized electronic debits.

Under the proposed stipulated final order, the defendants are barred from misrepresentations in the marketing of consumer electronics or any product requiring four or more periodic payments before shipment.

They also are barred from misrepresenting refunds, cancellations, exchanges, or repurchases of products without disclosing clearly and conspicuously, before receiving payment, the terms and conditions, and any policy of not refunding all payments when a consumer cancels the contract before product delivery.

In addition, they are permanently prohibited from violating the Mail Order Rule, the TILA and Regulation Z, and from conditioning the extension of credit on mandatory preauthorized transfers in violation of the EFTA and Regulation E.

The settlement includes a monetary judgment of at least $3.5 million and up to $5 million. This money will be used to provide redress to consumers who entered into contracts with the defendants before March 2006, made payments, and did not receive the ordered products, refunds, or other restitution.

If valid consumer claims exceed $3.5 million, the defendants will be required to pay up to an additional $1.5 million to pay those claims. The settlement also requires the defendants to stop collecting money from purchasers who are entitled to redress, to stop furnishing derogatory information about such purchasers to credit reporting agencies, and to notify any agency to which they have provided such information that the person's account is in good standing.

-- Federal Courts have dealt a blow to BlueHippo Funding by dismissing the company's attempt to force all of its customers to take their complaints to arbitration, opening the door to class-action lawsuits.

The company, based in Baltimore, sells computers and other electronic goods on a layaway program.

It was the center of a January 2007 investigation by ConsumerAffairs.com and targets low-income individuals with bad or no credit and sells cheap computers for as much as five times the value and often never delivers any product, even after hundreds of dollars have already been paid, according to customer complaints.

"I heard about BlueHippo on the radio," Littia of Oakland, Calif. wrote to ConsumerAffairs.com. "They said they have helped thousands of consumers, regardless of their credit, to get a computer of your own. All I had to do was send a $100 check to them and they would take $53.32 out of my account each month."

"It's been seven months and I have been calling them on why I have not gotten any more information from them." Littia continued. "They can take money from my account, but I can not get my money back, only store credit. I want my $500."

Littia is one of 291 consumers who, as of this writing, have filed similar complaints with ConsumerAffairs.com.

Tuesday's decision by the 4th U.S. Circuit Court of Appeals in Richmond, Va. does little to aid consumers in the short term, but in the long run, it could "put BlueHippo out of business," said David Marshall, the attorney who filed class-action lawsuits against BlueHippo in Maryland and California.

BlueHippo secures its orders when customers call to inquire. After a few weeks of payments, the company delivers a contract to customers which states that they cannot enter a class-action lawsuit, but rather, must use a third-party arbitrator to settle any claims. Marshall said the arbitrator BlueHippo uses rarely settles in favor of consumers.

Many consumers never sign or return that contract, Marshall said. Despite that, BlueHippo has tried to force all dissatisfied customers into arbitration. Tuesday's decision held up that only customers who signed the contract could be forced into arbitration rather than enter a class-action.

Although the Maryland class-action lawsuit was unsuccessful, Marshall said with the federal court's decision, it bolsters his case in California where class-action waivers are not recognized.

California comprises about 15 percent of BlueHippo's customer base, Marshall said potentially enough to put the company out of business if the class-action is successful.

The company could appeal the court's decision but did not respond to a request for comment from ConsumerAffairs.com.

The company is also under investigation by the attorneys general in West Virgina, Florida and Illinois and settled with the Maryland attorney general in May.

As a result of that settlement, Maryland consumers who received nothing or overpaid for their BlueHippo products, will receive reimbursements starting in early 2008, attorney general spokeswoman Raquel Guillory, said.

A class action lawsuit accuses Blue Hippo Funding of "an elaborate scheme to violate a host of federal and state consumer protection laws" through its broadcast and online sales of big-screen TVs, computers and other consumer items.

The latest lawsuit, filed in Maryland, is similar to one filed two weeks ago in California. It argues that Blue Hippo collects payments from customers, then delays shipments and won't give refunds - even if the product is never delivered.

Blue Hippo requires at least 13 consecutive weeks of payment before it will ship a product and, even once that threshold is crossed, the suit charges other obstacles often arise.

Blue Hippo portrays itself as a friend of those with bad credit, claiming it helps them buy products they otherwise wouldn't be able to afford. Basically, the company sells plasma TVs, computers and other merchandise through a pay-in-advance credit plan.

"I called to order a computer which I saw on television on an infomercial," said Rhonda of Van Nuys CA in a complaint to ConsumerAffairs.com. "When I called to cancel they said 'ok' but now I get a letter from a collection attorney's office saying that they are holding me to that contract even though I don't have a computer from them nor did I sign any contract."

They said they will get a judgment against me for $2100," Rhonda said.

Darrell Proctor, a columnist for Denver's Rocky Mountain News, recently wrote that consumers "would pay $1,820 to Blue Hippo for a computer that would retail for about $500."

It's hard to tell from the company's Web site whether prices are reasonable, as cash prices aren't specified. Everything is stated in terms of weekly payments.

On its Web site on March 17, BlueHippo was offering a desktop computer for $99 down and $39.99 per week. It's not immediately apparent how long the payments last but it's quite likely most consumers could find a similar computer for a lot less if they saved their money and paid cash.

As the result of a settlement with the Maryland attorney general, BlueHippo Funding, a layaway computer sales company, will have to forfeit all of its profits to Maryland consumers who received overpriced products and make full refunds to those who received nothing for their money.

The office of the Maryland attorney general will also resolve BlueHippo complaints for consumers outside the state of Maryland. Those consumers should call the Consumer Protection Division at (410) 528-8662.

BlueHippo CEO Joseph Rensin (left) begs off questioning by WJLA-TV's Ross McLaughlin.

Maryland attorney general Douglas Gansler and BlueHippo settled after a two-year investigation stemming from 1,320 complaints filed with the Maryland Better Business Bureau.

This company has misled customers nationwide and as of today, they have agreed to halt their deceptive business practices, Gansler said.

Gansler estimated the settlement will cost BlueHippo $1 million on top of $300,000 the company must pay in restitution to the attorney generals consumer protection division.

The company, which ConsumerAffairs.com dissected in a January 2007 investigation in January, makes big profits by selling desktops, laptops and televisions to consumers with bad credit on a layaway plan. However, consumers often end up paying as much as five times the value of the product and in many cases, never receive anything.

ConsumerAffairs.com has received 199 complaints from consumers as of this writing. The story is always the same:

I have repeatedly tried to cancel my order with BlueHippo Funding, wrote Karonise of Detroit, Mich. I have spoken to over six representatives in the last four weeks. Each representative said over and over again as if reading from a script: 'Why would you want to cancel? This is a great offer.'

"I have spoken with Ronald Campbell who identifies himself as a supervisor. He would not listen as I told him I have requested to cancel my order over four times now. He said he's sorry, but they cannot refund my money, Karonise told ConsumerAffairs.com.

But for BlueHippos Maryland costumers who received nothing, they will be getting their money back and for Maryland consumers who overpaid for products will be receiving the difference of how much they paid for the product versus how much BlueHippo paid.

Consumers should be receiving checks in the mail no later than early 2008, Ganslers spokeswoman, Raquel Guillory, said.

Consumers will not have to do anything to receive restitution because the attorney general is using sales documents to identify who will be receiving the checks and will then mail them accordingly.

Gansler estimates that as many as two-thirds of BlueHippos Maryland customers never received the computers or televisions they ordered. Additionally, when consumers failed to receive the goods and requested to cancel their orders, BlueHippo allegedly refused to refund the consumers payments, violating Maryland law.

In addition, the attorney general alleged that BlueHippo and Rensin:

• illegally deducted payments from consumers accounts;
• hid important terms of the transaction from consumers until after the company had deducted payments from consumers bank accounts;
• charged illegal late fees;
• misled consumers regarding promised discounts and rebates;
• failed to disclose conditions related to gifts and promotional items;
• misrepresented the type of credit being offered to consumers; and
• failed to disclose important loan terms.

The findings verify complaints receive by ConsumerAffairs.com.

BlueHippos founder and chief executive officer, Joseph Rensin, has feigned ignorance of any wrongdoing and still claims to have broken no laws.

The settlement agreement finds no wrong doing or violations of law occurred, according to a press release on BlueHippos website. Voluntary settlements of such allegations are a common business practice in corporate America BlueHippo believes it is in the best interest of consumers and its business to amicably resolve such claims without costly litigation.

In fact, companies often choose settlements rather than go to court because most of the documents used by the plaintiff against the company would become public record if the case went to trial.

In the criminal word, reaching a settlement before trial -- "on the courthouse steps," in common parlance -- is known as "copping a plea." It is generally a tactic used to avoid the stiffer sentence that often results if the case goes to a jury.

As a result of yesterdays settlement, BlueHippo must also comply with these conditions while doing business in Maryland:

• disclose all material terms and conditions regarding transactions including pricing, financing, delivery, customer default, quality/features of items offered for sale, free/promotional items and any rights consumers are purportedly waiving before entering into agreements that purport to bind consumers;

• provide Maryland customers with written, signed agreements setting forth all of the material terms of the sale before they take any payments from the customer;

• allow customers to cancel their orders and to receive refunds when required by Maryland lending laws; and

• stop charging Maryland consumers illegal late fees and comply with the Maryland Merchandise Delivery Law.

Maryland is the first state in the country to get BlueHippo to comply with consumer laws and make restitution to their customers, Gansler said in the statement.

West Virginia, Illinois and Florida have similar cases pending against BlueHippo. There is also a pending () class action lawsuit in California.

Consumers are urged to file complaints with their state attorney general and with ConsumerAffairs.com.

Pennsylvania has become the latest state to sue BlueHippo, the Maryland-based finance company that sells older, cheap computers at hugely inflated prices to people with poor or no credit.

Pennsylvania Attorney General Tom Corbett said the civil lawsuit was filed in Commonwealth Court against Joseph K. Rensin, of Ellicott City, Md., the owner, CEO and Chairman of the Board of BlueHippo Funding, 7000 Security Boulevard, Baltimore Maryland. Rensin and his business also operated as BlueHippo Capitol, of Vienna, Virginia and BlueHippo Capitol, of Las Vegas, Nevada.

"BlueHippo used a national campaign of television and radio ads, telemarketing calls and Internet websites to sell computers, flat screen TVs and other electronic equipment -- claiming to offer 'payments you can afford' for 'top of the line' products," Corbett said. "In reality, BlueHippo was little more than a sham designed to collect as much money as possible from consumers while delivering little, if anything, in return."

According to the lawsuit, consumers often paid more than twice the value of the items that they had purchased, received lesser quality items or failed to receive anything for their money. In other instances, the company did not provide rebates or gifts that were offered as part of a sale, or failed to pay consumer refunds when promised.

"BlueHippo allegedly used advertising language such as 'perfect for back to school' and 'get yours now,' which suggested fast delivery times," Corbett said. "While many customers believed they would receive their products in a timely manner, most were delivered months later -- or, in some cases -- not at all."

Trouble with the feds

Last November, the Federal Trade Commission (FTC) asked a federal court to find Blue Hippo in contempt of a 2008 court order that required it to end abusive consumer practices.

Since the order, the FTC estimates Blue Hippo has collected more than $15 million from consumers to finance computers, but delivered neither the financing nor the financed computers.

The FTC alleged that fewer than one percent of consumers who signed up with BlueHippo received the financed computers for which they applied, and undisclosed conditions to redeem "store credits" were rigged to discourage consumers from using them.

ConsumerAffairs.com continues to receive many complaints about BlueHippo, such as this one from Pamela, of Patterson, Calif.

'I smell a rat'

"I thought I was purchasing a computer. After I sent $100 to get the payments going, they told me it was a layaway and I don't get the computer until it's paid in full," she told ConsumerAffairs.com. "I smell a rat. I could go to any store I want for a layaway and pay two times less."

According to the Pennsylvania lawsuit, BlueHippo did not actually have any of the products they claimed to be selling. Instead, consumers were persuaded to make a series of weekly or bi-weekly payments to BlueHippo, and only after a history of successful payments would the products supposedly be ordered and shipped.

Corbett said that during sales calls, consumers were often asked for bank account information, with BlueHippo making immediate withdrawals from their accounts long before consumers received any written information about the financing terms or other conditions about the purchase.

Additionally, BlueHippo is accused of conducting telemarketing without properly registering in Pennsylvania, operating as a loan broker without registering with the state Department of Banking, violating the Installment Sales Act and failing to register corporations and fictitious business names with the Pennsylvania Department of State.

Corbett said the lawsuit seeks full restitution for all consumers who were harmed by BlueHippo's unfair business practices, along with fines and penalties of up to $1,000 for each violation of Pennsylvania law, or fines of up to $3,000 for each violation involving a senior citizen.

While BlueHippo has profited handsomely from charging poor Americans top dollar for cheap products, the company's nonprofit arm, the BlueHippo Foundation, has touted all the great things it is doing to help close the gap of today's "digital divide" and to help the same people who fall victim to company's policies.

Joseph Rensin, BlueHippo's founder and CEO started the BlueHippo Foundation in May 2006 to "help brighten the futures and fortunes of America's children through improved financial literacy and a narrowing of the digital divide," according to the foundation's website.

BlueHippo has released a handful of press releases gloating about the scholarships it offers and about the foundation's "partnership" with the Boys and Girls Club of America. But specifics on actual donations are vague. It's also not clear whether the foundation is an actual 501(c)(3) nonprofit and if it is, its financial records will not be available to the public until at least June 2007.

The BlueHippo Foundation website, which is riddled with grammatical errors, claims two times that the company has a partnership with The Boys and Girls Club of America and proudly displays the club's logo.

"Through a newly formed partnership with the Boys and Girls Club of America, the BlueHippo Foundation is helping to narrow the America's digital divide [sic] by donating computers and equipment to Clubs in areas where access to advanced technologies may not be readily available," the website states.

A letter from BlueHippo CEO Rensin that appears on the website mentions the partnership.

But Brian Hill, a spokesman for the Boys and Girls Club of America said he had never heard of the BlueHippo Foundation.

"We don't currently have a national relationship with BlueHippo," Hill said.

"They probably made a few donations to some local Boys and Girls Clubs, put our logo on their website and are now claiming to have a partnership," Hill said after looking at the foundation's website. "We're going to have to get them to update their site."

Hill was right. Although BlueHippo vowed to engage in a variety of philanthropic activities "over the coming months," according to a press release, the BlueHippo Foundation has made only two donations to local Boy and Girls Clubs over more than six months.

Although the lengthy press releases are vague on any details regarding any actual donations, through research, ConsumerAffairs.com determined that to this day, the BlueHippo Foundation has donated a total of seven computers. Assuming the computers are a little nicer than the ones the company sells, the BlueHippo Foundation has donated approximately $6,000 worth of computer equipment.

The first donation, on July 27, 2006, was "the creation of three new computer labs for area chapters of the Salvation Army Boys and Girls Club of America," according to the lead in a press release.

Deeper in the correlating press release, one discovers that the computer labs actually already existed. The press release gives almost no specifics on the donation or what Boys and Girls Clubs actually received the donation.

ConsumerAffairs.com called all the D.C.-area Boys and Girls Clubs and determined that by "three new computer labs," BlueHippo actually meant "two new computers" to three Boys and Girls Clubs, according to those clubs' directors.

The second and final donation, according to the press releases was "computer equipment" donated to a Boys and Girls Club in McKeesport, Pa. on Oct. 5, 2006. The computer equipment was included in an auction. Although the press release is 257 words, there is no mention of what the "computer equipment" was or how much it fetched in the auction.

In reality, that "computer equipment" was in fact, one Gateway computer that fetched $600 in the auction according to Tom Maglicco, the club's director.

BlueHippo also has said that the BlueHippo Foundation will offer scholarships to "two Maryland community college students to assist in their study of computer science or mathematics," according to a press release.

So far it's unclear whether anyone has received any money through this scholarship.

The "scholarship" link on the foundation's website transfers to a page that has stated for at least three months that, "the BlueHippo Foundation will be offering dozens of scholarships to cover the tuition for students attending community colleges across the country. ... Details will be released in the near future."

Big Spender

The BlueHippo Foundation is not the first philanthropic endeavor for BlueHippo Funding.

While The Baltimore Sun was investigating BlueHippo in 2004, Rensin said he was donating money to the Baltimore Zoo. Before The Sun's article came out on Feb. 15, 2004, the website promised that some of the proceeds from sales would go straight to the zoo.

"We just write them a check," Rensin said in The Sun article. "We bundle them up and pay them once a quarter."

The day after The Sun's interview with Rensin, the newspaper called the zoo and zoo officials said they had received a payment that morning for $1,002. It was the first contact they had had with BlueHippo.

ConsumerAffairs.com called the zoo last month and zoo spokeswoman Lainie Contreras would not say how much BlueHippo had donated but verified that the zoo has only received one donation from the company.

Trouble Follows BlueHippo's Founder

Texas has become the latest state to file charges against BlueHippo Funding, LLC, accusing the bankrupt computer seller of violating the state's Deceptive Practices Act by failing to deliver computers and related equipment to purchasers, who were primarily customers with poor credit ratings.

BlueHippo advertised computers that could be purchased on a "law-away plan," with consumers making monthly, and sometimes weekly payments, for a period of time. But the computers were priced much higher than comparable machines from retailers and were often old technology. And that's when consumers actually received the computers they overpaid for.

Over the years ConsumerAffairs.com repeatedly heard from consumers who said they paid hundreds of dollars, and sometimes as much as $2000, but never got anything for their money.

As recently as this week, ConsumerAffairs.com received consumer complaints about BlueHippo.

"I sent BlueHippo money for a laptop, Cody, of Faulkton, S.D., told ConsumerAffairs.com. "I made all payments, sent back all paperwork, no computer. I stopped allowing them to take money from my account upon not being able to get in touch with anyone in customer service."

According to the Texas enforcement action, BlueHippo Funding, LLC and its sole shareholder Joseph K. Rensin of Maryland never registered to conduct business in Texas. However, the defendants' advertising targeted Texans with poor credit who wanted computers, but whose limited financial resources led them to use the defendants' law-away plan, the complaint says. Other defendants named are BlueHippo Capital, LLC of Virginia and Nevada.

Working with bankruptcy court

In addition to today's state enforcement action, which was filed in Travis County District Court, the Texas Attorney General Greg Abbott said he is working closely with the Chapter 7 liquidating trustee that was recently appointed in the defendants' Delaware bankruptcy case. By pursuing recoveries in state and federal courts, Texas is working to improve the likelihood that consumers' restitution claims will be fulfilled.

Texas' action and the continued complaints from consumers suggests a lengthy unwinding period from Blue Hippo's long history of marketing over-priced computers to consumers with limited options.

Abbott says Blue Hippo advertised a toll-free number and Web site where customers seeking to purchase a computer would be guaranteed financing, regardless of credit. Potential customers were told that they would be required to make a certain number of layaway payments. Those payments would purportedly secure the buyer's right to purchase their computers, and BlueHippo would finance the remaining balance.

However, the defendants failed to disclose several consequences until after customers signed layaway plans -- plans that could financially damage them. According to customer complaints received by the Texas Office of the Attorney General, the company failed to ship computers as they were contractually obligated to do, even though customers made the required number of consecutive layaway payments. Complaints also indicate the defendants failed to ship, as promised, certain "free" products, such as printers, software and televisions.

Missing Items

"I set up an account through BlueHippo to get a dell desktop computer," Kristina, of Newport News, Va., told ConsumerAffairs.com. "After complaining several times about not receiving the computer we finally got it. We were also suppose to receive a printer and digital camera. Also we were supposed to get back a $350 rebate. I have all of my bank account statements as well as all the paperwork I received from them. I want to know what i can do to receive my printer and digital camera or the money that equals it as well as my rebate."

Some customers repeatedly contacted the defendants by phone about BlueHippo's failure to deliver the partially purchased products. As a result, customers became frustrated, canceled their orders and requested that the defendants fully refund them. Instead of refunding customers' installment payments, however, BlueHippo referred customers to a clause in the layaway plan stating that cancellations would merely receive a "store credit."

After tiring of the defendants' duplicity, Abbott says customers grew so frustrated that they notified their banks to stop BlueHippo's automatic debit withdrawals from their checking accounts. However, BlueHippo claimed that customers who stopped automatic withdrawals were subject to "default" provisions in the "retail installment contract," which the defendants claimed allowed BlueHippo to increase interest rates to 24 percent, or the highest interest rate allowable by law.

Worse, Abbott says the company maintained that the contract permitted it to continue withdrawing payments from customers' accounts. As a result, the defendants essentially used the customers' stop payment instructions as an excuse to increase interest rates and therefore simply ignored customers' clear instructions to the contrary.

The attorney general seeks civil penalties against these defendants of up to $20,000 per violation of the Texas Deceptive Trade Practices Act, as well as restitution to financially harmed consumers.

The Federal Trade Commission (FTC) has asked a federal court to find Blue Hippo in contempt of a 2008 court order that required it to end abusive consumer practices.

Since the order, the FTC estimates Blue Hippo has collected more than $15 million from consumers to finance computers, but elivered neither the financing nor the financed computers.

The FTC alleged that less than one percent of consumers who signed up with BlueHippo received the financed computers they applied for, and undisclosed conditions to redeem store credits were rigged to discourage consumers from using them.

In a contempt motion lodged with the court, the FTC charged that BlueHippo has flouted a 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 313 complaints to ConsumerAffairs.com over the last 12 months bolster the agency's claims that Blue Hippo has continued to exploit consumers.

"Blue Hippo was supposed to send me a computer a year ago," Luis, of Chiefland, Fla., told ConsumerAffairs.com. "I constantly keep calling them regarding this computer and they always answer the same as usual. Their response is that I have to call back in four weeks. Blue Hippo has taken 1,000 dollars from my checking account."

2008 settlement

The FTC reached a settlement with Baltimore-based BlueHippo in April 2008 that required the company to pay $3.5 million for consumer redress and barred the defendants from further deceiving customers. According to the FTCs 2008 complaint, BlueHippo Funding, LLC and affiliate BlueHippo Capital, LLC 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 bi-weekly payments ranging from $36 to $88.

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. The Commission charged that BlueHippos marketing tactics were deceptive, and violated the FTC Act and other federal credit statutes.

In addition, the computers provided are often out of date models with little memory -- the type of machine that can be bought at a discount store for less than $400. Consumers often had to pay Blue Hippo as much as $2000 before receiving one of these computers.

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

Same old song

Even after this settlement order was entered by the court, BlueHippo continued to deceive consumers, according to the FTC. The company aggressively marketed itself as a computer finance company and spent the rest of 2008 signing up customers and taking their money, but failing to provide them with financed computers.

The FTCs contempt motion alleges that between April and December of 2008, more than 35,000 customers contracted for BlueHippos computer financing deal. But the company provided, at most, a single financed computer, failing to provide financed computers even for 2,477 customers who managed to meet the companies conditions. Complaints about the company poured into the Better Business Bureau. On top of all that, BlueHippo failed to submit a report to the FTC showing how it was complying with the settlement, as required by the order.

Finally, in April, 2009, after the FTC notified the court that BlueHippo was violating the settlement, the company began ordering thousands of computers. Even so, the FTC alleges that BlueHippo failed to order computers for 1,015 of the 2,477 consumers 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 even order -- let alone 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, according to the FTCs contempt motion.

The FTCs contempt motion also charged that BlueHippo failed to disclose key aspects of its refund policy. In particular, 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 -- and that they could only order one item at a time.

Blue Hippo Funding, the company that marketed overpriced computers to people with poor credit, may be gone but it's not forgotten.

In Pennsylvania, Attorney General Linda Kelly has secured a nearly $1.8 million settlement in her consumer protection lawsuit against the founder and owner of the Maryland-based company. The suit accused BlueHippo of preying on Pennsylvania consumers with poor credit.

Blue Hippo filed for bankruptcy in November 2009 and shortly thereafter began proceedings to dissolve the firm. It was sued by several states and the Federal Trade Commission (FTC) after consumers complained they made a number of payments but never received their merchandise.

"Blue Hippo allegedly used a national campaign of television and radio ads, telemarketing calls and Internet websites to lure consumers into purchasing computers, flat screen TV?s and other electronic equipment," Kelly said. "In reality, the complaints we received indicated BlueHippo was little more than a sham enterprise that delivered few, if any, products to consumers."

Act quickly

Consumers rate BlueHippo

Pennsylvania consumers who encountered problems with BlueHippo, but have not yet filed formal complaints, are encouraged to do so as soon as possible. Kelly said that under the terms of the settlement, the company's owner will pay restitution in the amount of $200,000, which will be used to compensate.

Blue Hippo sold computers and big screen TVs on a layaway plan. Consumers, most of whom had little or no credit, were required to make to make weekly payments for several months before their received their merchandise. Generally, computers that might sell for $500 in a retail store would be listed at more than $2,000. Often, consumers would never receive what they paid for.

"While our Bureau of Consumer Protection has already received complaints from more than 300 consumers regarding BlueHippo, we believe that there are other potential victims who have not yet come forward," Kelly said.

Pennsylvania residents with problems or complaints involving BlueHippo should call the Attorney General's toll-free consumer protection hotline, at 1-800-441-2555.