Pinnacle Security Group, LLC, a Utah-based home security company charged with using deceptive door-to-door sales tactics to trick New York homeowners into signing contracts for unnecessary services, has agreed to a settlement with the State of New York.
Illinois sued the firm last October, charging similar violations.
The settlement requires Pinnacle to pay restitution to New Yorkers, pay a $150,000 penalty, and reform its sales practices. Pinnacle has signed contracts with approximately 4,000 customers throughout New York since 2008.
The company's home security contracts were for a term of 39 months and included monthly service fees, installation fees, activation fees, and equipment charges. An investigation by New York Attorney General Andrew Cuomo revealed that Pinnacles door-to-door sales staff often targeted homeowners who had existing contracts with other security companies.
In a deceptive practice known as slamming, Cuomo says Pinnacle sales staff then made false representations to convince people to sign up for Pinnacle products even though the consumer had a contract with another home security company. Pinnacle misled homeowners into believing that their existing home security provider had gone out of business, had merged with Pinnacle, or was in some way already affiliated with Pinnacle.
As a result of this deception, unsuspecting homeowners signed up for a contract with Pinnacle when they were still bound by their prior home security contract. Homeowners were then stuck paying for redundant monthly services from two security companies, including upwards of $50 per month for Pinnacle.
Consumers who tried to void the contract were often faced with substantial cancellation fees. For example, Pinnacle would demand full and immediate payment of the entire cost of their contract if consumers wanted to cancel early; these costs could amount to $1,900.
Pinnacle used dirty tricks and deception to pressure New Yorkers who were simply trying to ensure the security of their homes, Cuomo said. This settlement holds Pinnacle accountable for their actions and makes fundamental reforms to the company to prevent such fraud from happening again.
Cuomo says his investigation revealed that Pinnacles sales team made phony telephone calls to homeowners to tell them that their existing home security contract had been canceled; misrepresented the terms of their contracts, and changed the terms of contracts after consumers signed them.