Judge rules for AG Miller, company plans appeal

Nick Rees Mar. 24, 2010, 3:20am


DES MOINES, Iowa (Legal Newsline) - A Polk County judge has ruled that Vertrue, Inc., used deceptive and unfair practices in marketing its so-called "buying club" memberships to almost half a million Iowans over the last 20 years, earning more than $36 million revenue.

"Our jaws dropped, too, when we discovered the numbers," Iowa Attorney General Tom Miller, who filed the lawsuit against Vertrue, said. "We learned during the litigation that, as of mid-2009, 497,683 Iowans had been enrolled in 863,970 buying club memberships offered by Vertrue over two decades."

Memberships into Vertrue cost between $9.95 to $19.95 per month. These charges were usually made to a consumer's credit card or bank account. The memberships supposedly provided discounts or savings on books, music, clothing, home improvement items, entertainment activities, dining out, and fashion and fitness products, Miller said.

Polk County District Court Judge Robert Hutchinson ruled that Vertrue used deceptive and unfair techniques for more than two decades to enroll consumers in memberships and charge their credit cards, many times without the consumers' knowledge. This led to consumers making monthly or annual payments for memberships they were unaware of, he said.

"We filed the lawsuit because consumers consistently told us they didn't even know they were members," Miller said. "We alleged Vertrue's illegal sales practices resulted in a vast number of Iowans' credit cards being charged, sometimes repeatedly, for memberships most of the Iowans didn't even know they had and never used."

Miller's lawsuit alleged Vertrue violated the Iowa Consumer Fraud Act and Iowa's Buying Club Law. The suit was tried in October and November of last year in a bench trial before Hutchison. Hutchinson issued a 62-page ruling last week that found Vertrue and its subsidiary companies - Adaptive Marketing LLC and Idaptive Marketing LLC - were guilty of consumer fraud.

In a separate proceeding yet to be scheduled, Judge Hutchinson will determine restitution or penalties for Vertrue.

"We will be seeking restitution for consumers and penalties for Vertrue in the next phase of this case," Miller said.

Vertrue said it is disappointed in the ruling and will appeal.

"It is noteworthy that this ruling from an Iowa state court is inconsistent with the findings by three federal courts, all of which have found the marketing practices at issue in the Iowa case to be appropriate, lawful and clear," the company said.

"We continue to believe that our operating company's marketing programs provide consumers with access to significant and realizable benefits, and we have worked hard to develop pro-consumer marketing practices that exceed industry standards."

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