FTD and Classmates pay $11M to settle charges
Attorneys general from 22 states reached an $11 million settlement with Classmates and Florists' Transworld Delivery (FTD) after accusing the companies of using deceptive marketing practices to lock consumers into membership programs they didn't sign up for.
The companies were accused of employing third parities that used "negative option marketing," a practice that's considered deceptive because it requires consumers to specifically reject an offer that's otherwise taken as accepted.
Consumers were signed up for such things as travel rewards programs and discount buying clubs after they finished a transaction with FTD or Classmates.com, according to the attorneys general. Credit card and personal information that had been collected during transactions was then shared with the marketers, according to the allegations, even though federal law prohibits that.
"These companies' practices were deceptive," Illinois Attorney General Lisa Madigan said in a statement. "After customers made a purchase, they were also charged for goods and services they never requested or wanted."
In reaching the settlement, which will be divided among the states, FTD and Classmates denied any wrongdoing. They also agreed to create barriers to prevent their customers' information from getting into the hands of third-party marketing companies without consumers' consent.
"This is a suspect sales practice that often goes unnoticed by customers who end up paying for something they never wanted," Maryland Attorney General Brian Frosh said in a statement. "Consumers should always carefully review service agreements or other add-on offers when making a purchase to ensure there are no strings attached."
In addition to the negative option issue, Classmates agreed to make it easier for its customers to cancel their subscriptions. As part of the overall settlement, Classmates is setting aside $3 million for refunds to consumers who had signed up for the service and had a hard time canceling.
States that participated in the settlement are Alabama, Alaska, Delaware, Florida, Idaho, Illinois, Kansas, Maine, Maryland, Michigan, Nebraska, New Jersey, New Mexico, North Dakota, Ohio, Oregon, Pennsylvania, South Dakota, Texas, Vermont, Washington and Wisconsin.
