BISMARCK, N.D. (Legal Newsline) - North Dakota Attorney General Wayne Stenehjem issued a cease and desist order on Friday against an Internet company for allegedly violating consumer fraud laws.
Florida-based XM Brands and its principal, Kenneth Jacobi, allegedly offer consumers free products to test, but then enrolled customers into costly membership programs without their knowledge.
The company sells health and diet products, including those for teeth whitening, acai berry and anti-aging, but their "free trial" offers and "negative option" return can be expensive, Stenehjem said.
"These offers are anything but free," Stenehjem said.
"Consumers unknowingly are enrolled by XM Brands in a membership program with automatic future shipments of products, and XM Brands charges the consumer's credit card the full price of the product each month until the consumer is eventually able to cancel the enrollment."
Stenehjem's office received numerous complaints about the company. Similar complaints against the company have been logged by attorneys general's offices around the country. The Better Business Bureau in Florida received more than 1,000 complaints against XM Brands in 2009, Stenehjem said.
"XM Brands' deceptive marketing practices are a ruse to trick consumers into unwanted or unauthorized purchases," Stenehjem said.
"Making it worse, because consumers often purchase the products via pop-up websites, it is very difficult for them later to locate the website to cancel."
Stenehjem alleges that XM Brands fails to disclose terms and conditions clearly so customers believe that they are just getting a product to sample. More products, however, will be sent to them and their credit cards charged, he says.