FTC Files Contempt Citation Against Blue Hippo

Agency claims company has ignored 2008 court order

By Mark Huffman
ConsumerAffairs.com

November 17, 2009

BlueHippo Funding An Investigative Series by Joseph S. Enoch • BlueHippo: Extreme Layaway • A Short History • The BlueHippo Foundation • Trouble Follows BlueHippo's Founder • What Should You Do? • BlueHippo's Response • BlueHippo Has Many Clones --- News • BlueHippo Charged with Violating Texas Law • FTC Files Contempt Citation Against Blue Hippo • Buying A Computer With Poor Credit • Gateway at Risk in BlueHippo Class Action • Blue Hippo Pays $5 Million To Settle FTC Charges • Federal Court Strikes Blue Hippo's Arbitration Clause • BlueHippo Funding Settles $1 Million Maryland Case • West Virginia Sues Blue Hippo • Class Actions Target Blue Hippo • Consumer Complaints

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 FTC’s 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 BlueHippo’s 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 FTC’s contempt motion alleges that between April and December of 2008, more than 35,000 customers contracted for BlueHippo’s 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 FTC’s contempt motion.

The FTC’s 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.

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