Md. firm's practices get FTC scrutiny

BlueHippo sells electronics to people with poor credit

March 15, 2006|By EILEEN AMBROSE | EILEEN AMBROSE,SUN REPORTER

BlueHippo Funding LLC, a Woodlawn company that sells computers and plasma TVs nationwide to people with poor credit, is under investigation by the Federal Trade Commission after being hit with hundreds of consumer complaints in its three years in business.

In addition to the federal probe, the Illinois attorney general's office sued the Baltimore County company late last year, Florida has begun an investigation and, last week, two Californians sued BlueHippo and are seeking class-action status to represent thousands of consumers.

Launched in April 2003, BlueHippo grew quickly through radio and cable television ads that pitched computers to those without access to traditional credit. Consumers pay through electronic debits to their bank accounts over one year. The company promises to ship merchandise once customers make three months' payments worth hundreds of dollars.

Early on, however, consumers began to complain that they didn't get their computers and weren't able to get refunds, and complaints have persisted.

The Better Business Bureau of Greater Maryland says it has logged 799 complaints in three years, making BlueHippo their most complained-about company. "We get calls every day," said Kerri Kelly, public relations manager with the BBB in Baltimore.

In August, the FTC subpoenaed Wachovia Bank for records relating to BlueHippo, according to a letter from FTC Secretary Donald S. Clark posted on the agency's Web site. BlueHippo, according to the letter, said the records were irrelevant to whether it had violated laws against deceptive mail or telephone ordering, and it tried unsuccessfully to quash the order. As recently as early March, the FTC was collecting evidence from consumers.

FTC officials say they don't comment on whether an investigation is taking place. But Clark, in his letter, stated, "BlueHippo's claim that this investigation is limited to issues related to the `timing of sales and shipments and delivery' ... is simply wrong."

BlueHippo's spokesman, Michael Waldron, would not comment about an investigation but said, "If an appropriate regulatory agency has a question with regard to the company's practices, BlueHippo fully cooperates with them in the interest of clearing up any concerns they may have."

BlueHippo said it caters to consumers earning an average of $40,000 but with a history of credit problems. The typical customer's credit score is 455, a level considered extremely risky, the company said. It said staffers explain the sales terms, including its no-refund policy. The number of complaints is small compared with the 160,000 customers served in the past three years, Waldron said.

"The company offers consumers with credit challenges the opportunity to purchase very expensive electronics when no other retailer or lender will," Waldron said.

Critics complain that BlueHippo prices its computers at three to five times the retail cost, so by the time customers get their computer they've already paid more than it's worth.

The higher prices reflect the higher cost of doing business with poor credit risks, the company said. It says more than 40 percent of its customers don't complete the payment plan once they receive the computer. About one-third give false bank account information, or the first payment is returned for insufficient funds, the company said.

One dissatisfied customer is Stacey Simms, who responded last year to BlueHippo's pitch.

"I said, `It must be legitimate. They have a TV commercial and are on the radio all the time,'" said Simms, a clerk with the Prince George's County vital records office.

She said she paid about $125 upfront, and $84 was debited from her bank account every two weeks. Simms said she was initially told she would get a computer after her first payment. But the delivery dates kept changing, extending out to three or four months, she said.

She complained to the Better Business Bureau. She also stopped payments despite BlueHippo's no-refund policy. "It was a hard decision. They had $500 of mine that I would never see again," she said.

Simms told the company she was reporting it to the Better Business Bureau. The next day, the company told her the computer had been shipped. She has the computer, but the experience has left her angry. "I was noticing they still have their commercials. How are they surviving?" she said.

After receiving 15 complaints, the Illinois attorney general sued BlueHippo and its president, Joseph K. Rensin, in November, accusing them of deceptive sales tactics. The lawsuit seeks to bar them from making sales in the state. "It seemed that these consumers were very much taken advantage of. That's why we acted quickly," said Melissa Merz, a spokeswoman for the Illinois attorney general.

Florida's attorney general's office, with 17 complaints against BlueHippo, launched an investigation in December.

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