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.
"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.