Scammy Computer Seller BlueHippo Settles With FTC For $5 Million

BlueHippo, the scammy “no credit check” computer seller accused in several states of taking money from customers without providing the computers and other electronics it supposedly sells, has settled with the FTC for $5 million. They did not admit wrongdoing.

From the Baltimore Sun:

BlueHippo will continue to operate, despite probes in several states – including Maryland, where a settlement has been reached – and a class-action lawsuit by customers.

Federal regulators said they were happy with the outcome.

BlueHippo is accused of enforcing an unfair “no refund” policy on consumers, and refusing to ship items in a timely fashion. When consumers tried to cancel, BlueHippo kept their “pre-payments.”

Specifically, the FTC alleged that by failing to ship merchandise in a reasonable time frame or denying consumers the right to cancel and get a refund, BlueHippo violated the FTC’s mail-order rule. Officials said the company also might have violated the federal Truth in Lending Act and its regulations by not giving consumers written disclosures before the transactions were made.

The commission also alleged that the company violated the Electronic Fund Transfer Act and its regulations by offering credit on the condition of repayment by preauthorized debits.

The FTC settlement bars the company from misrepresentations in the marketing of consumer equipment requiring more than four periodic payments. In addition, the company must fully disclose terms of refunds, cancellations or exchanges.

The FTC’s action does not address one issue that drew criticism at Maryland’s settlement last spring and elsewhere – the high cost of the computers. The company charged several times the retail price for the equipment, according to other settlements.

Founded in 2004, BlueHippo now describes a policy on its Web site that gives customers a cash refund within seven days of signing up and store credit for canceled purchases that can be redeemed by purchasing products on bluehippo.com.

Retailer settles FTC suit over PCs [Baltimore Sun] (Thanks, SwatLax!)

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  1. RobinB says:

    I remember seeing their ads on local tv stations–always wondered what the scam was.

  2. apotheosis says:

    Violated the FTC’s mail-order rule.
    (Might have) violated the federal Truth in Lending Act.
    Violated the Electronic Fund Transfer Act.

    …BlueHippo will continue to operate.

    :

  3. worst…company…ever

    well, maybe not, but they sure are up there

  4. savvy999 says:

    How do I go about stealing millions, get caught, and admit no wrongdoing?

    Corporate personhood and unaccountibility is sweet.

  5. Chols says:

    i didn’t know getting a computer was so hard?

    just make a weekly payment of $50 to yourself a week and in 3 months, viola! now picking a retailer that won’t shaft you in buying it…eh

  6. ivanthemute says:

    It’s the mail order version of Aarons Rents or Rent-A-Center. What makes me wonder is who in their right minds thinks “Gee, I could save $500 and buy a PC from Walmart, but I think instead I’ll buy one over the phone for $30 every week for the next year.”

  7. coold8 says:

    17″ monitor, only $3.99 a week. It sounds great, $4 a week for a monitor, with the simple exception of this:

    $4 a week time 52 weeks, plus down payment equals well over $200, for that $75 monitor you could find at any black friday rush sale, or on newegg.

  8. felixgolden says:

    Basically, they sell you a product at anywhere from 2.5 to 4 times its actual price by taking weekly payments from you until you’ve actually paid their cost on the item – about 6 – 13 weeks. They then ship it to you and keep taking payments for the remainder of the year.

    It’s the internet version of Rent-a-Center.

    You would be better off putting the same money aside for each week for 10 weeks and then going into the store and buying the same item.

  9. rbb says:

    @ivanthemute: But then they would have to save the money for 17 weeks before getting the computer. Where’s the instant gratification in that? Don’t you understand, they need the computer now to see how much their sub-prime loan is going up…

  10. jaydez says:

    I still hear their adds on the radio around here all the time. Its funny though. The commecials only run on the Hip-Hop Stations. The never run on the county, rock, classic rock, or alternative stations.

  11. 92BuickLeSabre says:

    @RobinB: Same here. You can’t watch the ad without immediately thinking up all the ways they could be screwing people over.

  12. timmus says:

    Bad FTC! A regulatory agency should not be involved in the practice of “settling”. It just sets a precedent for further industry abuses.

  13. B says:

    @rbb: No instant gratification here. You keep sending Blue Hippo money, and eventually they send you a computer, or nothing, in some cases.

  14. soulman901 says:

    FTC’s mail-order rule – That’s a new one to remember when companies like Tiger Direct gives you the shaft you deserve for ordering with them.

  15. I saw an ad on television for them this past weekend, actually. I’d wondered what became of this case. How long until they get in trouble again?

  16. chemman says:

    Oh Great! Thousands or hundreds of thousands of consumers get screwed by this company and what happens. They pay a fine to the FTC and admit no wrong doing and keep on operating, just in a slightly less scummy way. Glad to see the poor consumers were really vindicated, I bet they feel better knowing some faceless government entity is now 5 million richer and they get zippo! Governement action at it’s finest!

  17. yesteryear says:

    i’m usually the first one to defend even the stupidest of consumers, but in this case i just can’t. even without a computer you can look at the sunday paper and see that better systems are selling for half as much. everyone saying ‘pay yourself each month and then use cash’ is right. i bet when you call blue hippo to order the computer they also offer you their ‘high speed dial up’ service. i think people pc did that?

  18. orielbean says:

    Chemman, I bet they could still file a class action suit for punishment. The FTC is another story.

  19. SkyeBlue says:

    Sure, the government is happy, they got the $$$. But what about the people who are out their money? What sense does it make for the GOVERNMENT to get the settlement when it is the consumers who were the ones the money was stolen from? The laws in regards to things like this defintely need to be revised!

  20. rbb says:

    @B: The appearance of self-gratification is the only thing that matters here. To the person lacking common-sense or personnel responsibility, Blue Hippo appears to be offering them a faster, more immediate, and “cheaper way to get a computer – never mind the details! Given the choice between paying a small amount every every week is easier than saving the money over many weeks.

    Even 25 years ago, I gave my Airmen the same advice concerning the rent to own stores that plague military bases – take the number of weeks that you have to pay, divide it by 2 or 3 and that’s how many weeks you need to save to buy it outright from a reputable dealer.

  21. smelendez says:

    BlueHippo manages to be worse than the typical rent-to-own store. At least with Rent-a-Center, you get to go in and go home with a computer. With BlueHippo, you have to keep paying them until you’ve paid much more than any reasonable retail price for their crappy overstock computers, at which point they send you the computer and continue to bill you for roughly the rest of your life.

    By putting the money in a bank or under your mattress, you’d not only pay less but be able to get a computer IN THE SAME AMOUNT OF TIME from a relatively non-sleazy retailer who might actually give you decent tech support.

  22. picantel says:

    I have seen this company all over the ripoffreport and internet. Not only do they charge multiple times the price but once you do pay everything off they just ignore you and never send the product. I am really surprised criminal charges of theft and fraud have not been filed but would not be surprised if they were.

  23. Snarkysnake says:

    I’m convinced that when this company eventually collapses on itself and goes away,it will become a facinating case study for all business school students involved with the study of libertarian principles of a “free” market.A worse deal for the consumer would be hard to imagine. The company seems to be a highly nuanced scheme to entice its target customers to get started on a payment plan that Blue Hippo knows will not likely be completed.A thick wall of terms and conditions (and a $175 “early termination fee”) almost guarantee that BH will collect more than the cost of their computer (monitor not included !) before the customer runs into trouble paying. If this is capitalism, it’s damn hard to defend…

  24. RandoX says:

    I heard their ad on the radio a few years ago and called them out of curiosity to see how much the computer actually costs. (They never said on the commercial). They REFUSED to actually tell me over the phone what the price was until I gave them my personal info. Needless to say, I didn’t care enough to give it to them.

  25. Meanwhile some poor schmuck goes to jail for years for getting caught with a little weed in his car.

    Corporations are allowed to hurt people. Corporations can do things way way worse than citizens, and not be penalized.
    The Founding Fathers were correct when they were afraid of corporations. Their worst fears have come true.

  26. stinerman says:

    @Snarkysnake:
    Free market theory assumes some pretty unreasonable things about people, which is why the theory fails in some circumstances. For instance, it assumes that everyone has perfect information about products in the market. That is almost never the case. It also assumes that people will always behave in a rational manner by “maximizing expected utility”, and for the purposes of the theory being rational is defined as maximizing one’s utility; it’s essentially a tautological argument.

    Blue Hippo counts on both of these. No one in their right mind would buy a computer from them, which goes back to the utility argument. Similarly, consumers didn’t have all the information they needed to make an educated decision (and even when they did, they were too ignorant to choose the obvious option).

    Free markets work well enough when there is ample competition and consumers have sufficient information of products they may buy to make an educated choice. Without these preconditions, government intervention is warranted — either to provide the good or service themselves or to create the preconditions via regulation.

  27. consumerd says:

    I kind of thought maybe I should start selling computers and not bother to ship them. least the fine won’t be much in the FTC’s eyes!

    Utterly ridiculous.

  28. CPC24 says:

    Blue and yellow? Gee, that looks familiar. I’m almost surprised they didn’t get sued for that, too.

  29. nequam says:

    The suggestion the the FTC should adopt a no-settlement practice is impractical and a little naive. Enforcement actions require tremendous resources. In this case, the FTC succeeded in changing the return policy and other issues it had raised. As the article states, BH still faces other enforcement actions as well as a class action suit. Injured consumers are not left without recourse.

  30. DePaulBlueDemon says:

    How it works:

    “Unlike other financial companies, BlueHippo® doesn’t check your credit and measure you based on some score. Since we don’t check your credit, we do ask that you build a credit history with us by paying a $99.00 initial fee, followed by 52 weeks of consecutive layaway payments of $39.99. After 13 weeks we can then offer to finance the balance of your purchase price, order your computer, and have it shipped directly to your home via UPS or FedEx. It’s that simple!” [Source: bluehippo.com]

    You’re basically asked to pay about $2,700 for a $500 computer. It’s absolutely frightening.

  31. NigerianScammer says:

    @jaydez:
    I see what you’re getting at there…

  32. apotheosis says:

    @NigerianScammer:
    They’re marketing to suburban white kids?

  33. flconsumer2 says:

    So what did the actual VICTIMS of this — the ones hurt by Blue Hippo — get out of this? Is any of the money at all going to them or does the government get it all?

  34. NigerianScammer says:

    @apotheosis:
    Something of that nature, yes.

  35. cynthiaaurand says:

    I am one of the people that order through blue hippo,I did not go for the early delievery, I paid the whole thing, an waited for the computer. I didn’t know what kind of computer to get , I,m older an have never had any contact with computers, thought this would be a good way to get a good computer,and everthing needed to go with it .It’s been 7 months an i’m still waiting for the printer ,an t.v. they said i would get after last payment . I never saw any bad information on them until after i paid for it . An i paid out early. I knew i would pay a little more, I didn,t know it would be as much as it was now i feel stupid!!!!

  36. Anonymous says:

    Do you know that BlueHippo is STILL allowed to do other people what they’ve been doing all along? Do you also know that the FTC, BBB, Attorney Generals and basically any office of the DOJ are just turning their backs on everyone while this company quietly leaves the country. Sited don’t update recent events. Judgments against BlueHippo mean nothing. And the real joke about consumer protection is that it does not exist. What is it about BlueHippo that gives them the power to do what they do without accountability. I’m never going to see my money or my product. I truly hope someone finds BlueHippo and nukes them. All of them. Even the people who work for BlueHippo know they are crooks. They sit there and lie and they know they do. They rank right up there with some of the tele-evangelists. They rank right up there with Madoff.