BlueHippo Must Pay $14M For Continuing To Rip Off Customers

Seven years after federal regulators charged shady “no credit check” computer seller BlueHippo with contempt for allegedly violating a 2008 order by continuing to take money from customers without providing promised computers, the company has been ordered to pay $13.4 million. 

BlueHippo, which filed for Chapter 7 bankruptcy in 2009 after it could no longer pay its bills, previously agreed to a settlement in 2008 to pay $5 million and revamp its practices to settle allegations that it operated a deceptive computer financing scheme.

The computer layaway service was 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.”

According to the FTC’s 2008 complaint [PDF], 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 charged that BlueHippo’s marketing tactics were deceptive, and violated the FTC Act and other federal credit statutes.

Nearly two years after the company settled those allegations with the FTC, the regulator filed a contempt order [PDF] alleging BlueHippo continued to sign up customers as quickly as it had before the settlement.

Between April 2008 and July 2009, customers placed 62,673 orders for computers through BlueHippo.

However, like it had previously done, the company failed to provide either merchandise or store credit for 55,892 of the orders — totaling $14 million, as of July 24, 2009.

A hearing on the matter found that BlueHippo was in violation of its 2008 order, and the court awarded consumer redress of only $609,000.

The FTC appealed the redress award, and a U.S. District Court for the Southern District of New York entered a new judgment [PDF] of $13.4 million against BlueHippo CEO Joseph Rensin.

“This scheme preyed on cash-strapped consumers looking for computers to improve their lives and the lives of their children,” Jessica Rich, the Director of the Federal Trade Commission’s Bureau of Consumer Protection, said in a statement.

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