Lender BlueHippo slammed by FTC for allegedly collecting $15 million in exchange for nothing

BlueHippo.com, which markets itself as a way for the credit-challenged to buy a new computer and other electronics, has been ripping off its customers and should be ordered to stop, the Federal Trade Commission told a federal judge today.

"BlueHippo is a company with a business model based on deceit," FTC Chairman Jon Leibowitz said in a statement. The company is also allegedly operating in violation of a 2008 agreement to settle a previous case brought by the FTC.

Among its complaints, the FTC says BlueHippo took in $15 million under the guise of financing computer purchases for their customers, but it neither provided the financing nor the computers. Fewer than 1 percent of customers received what they signed up for, the FTC said.

A call to BlueHippo's designated phone number for the media rolls into a voice mail that doesn't accept messages. And a call to their spokesman at the Washington, D.C. offices of an international public relations firm was not returned.

UPDATE (11/16):Blue Hippo released a statement over the weekend:

"The FTC has now filed legal papers containing inaccurate allegations and attempting to change the terms of the parties' agreement nineteen months after the fact. BlueHippo intends to vigorously fight these allegations and to take all steps available to it to rebut the FTC's unfounded claims. BlueHippo has shipped many tens of thousands of brand new computers to customers across the country. We are fully confident that, when the FTC's misstatements have been corrected and the actual facts have seen the light of day, the company will be fully vindicated."

BlueHippo's sales pitch
is obviously alluring to credit-strapped consumers. The company offers to lend them the money to buy a new computer -- and computer equipment -- without a credit check. The catch: customers need to make some upfront payments first. The FTC says BlueHippo would ask for down payments of $99 to $124 that would be followed by one year of weekly or bi-weekly payments of $36 to $88. After 13 payments, the customer was supposed to receive the product.. Most did not.

BlueHippo has an extensive track record of leaving unhappy customers behind. The Better Business Bureau in Maryland, where BlueHippo is based, has recorded 4,135 complaints against the company in the past three years. That's a large group of disgruntled customers when you consider that official complaints tend to represent a small portion of the actual number of people who are aggrieved. Even worse, the company has not responded to the complaints, the BBB said.

In 2008, BlueHippo reached a settlement with the FTC, under which it agreed to pay $3.5 million to compensate consumers and promised to stop deceiving them. Yet, after the agreement was signed, BlueHippo spent the rest of the year doing exactly the same thing, the FTC says. Between April 2008 and December 2008, BlueHippo signed up more than 35,000 customers. Of the 2,477 customers who met all the company's conditions, none received a computer, the FTC says. At best, it says, one financed computer was provided. BlueHippo also stopped reporting to the FTC, violating yet another part of the agreement, the commission says.

In April, the FTC went to federal court to report that BlueHippo had violated the agreement. The action resulted in a computer ordering frenzy by BlueHippo that still left more than 1,000 of the qualified customers without one. The company had committed to get the computers to its customers in less than one month, but took an average of six months, the FTC said.

To add insult to its already-injured customers, BlueHippo hid its refund policy from them, the FTC says. The company's policy stated that any order canceled after seven days would not be eligible for a monetary refund but rather credits toward purchases that could only be made if the customer followed strict guidelines -- including the upfront payment by money order of shipping and handling and taxes, even if the customer had enough credit to cover those costs.

UPDATE (11/25): Blue Hippo has filed for bankruptcy protection.
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