A Polk County judge has ordered Connecticut-based Vertrue, Inc., to pay more than $30 million in restitution, penalties and costs after ruling the corporation violated Iowa's buying club law and used deceptive and unfair practices to market so-called buying club memberships to nearly a half-million Iowans over the past 20 years.
The $32.6 million judgment includes $29.8 million in consumer restitution, $2.8 million in civil penalties, and $725,000 in costs and fees.
Polk County District Court Judge Robert Hutchinson ruled on Tuesday that since 1993, Vertrue unlawfully marketed 639,721 "memberships" in discount programs to Iowans. These buying club "memberships" typically cost $9.95 per month, with charges usually made to consumers' credit cards or bank accounts. The memberships purported to provide discounts or savings on books, music, clothing, home improvement product and entertainment activities.
"It is certain that Iowans relied on the concealment and omission by Vertrue, and were damaged by the concealment and omission," Hutchinson wrote in his 45-page ruling. "The court finds that 90 percent of the consumers who purchased Vertrue membership discount programs would have cancelled those programs within the statutory three-day period had they been properly and conspicuously advised of their right to cancel ..."
"This is an outstanding outcome for hundreds of thousands of Iowans who were duped by this company and its deceptive practices," said Iowa Attorney General Tom Miller. "I am elated at this decision that will grant Iowans the restitution they deserve.
The ruling is the largest consumer protection verdict ever awarded in Iowa in a case filed by the Attorney General, and one of the largest of its kind in the nation.
Vertrue has the option to appeal the judgment, Miller noted, so it is premature to determine how restitution will be distributed to Iowans who suffered losses.
On March 18, 2010, Judge Hutchinson ruled that Vertrue (formerly known as MemberWorks, Inc.) and its subsidiaries, Adaptive Marketing LLC, and Idaptive Marketing LLC, violated Iowa's Consumer Fraud Act and Iowa's Buying Club law. The liability ruling followed Miller's consumer fraud lawsuit filed against the company in May 2006.