Iowa AG sues Texas membership club

Bryan Cohen Aug. 23, 2011, 5:13am

DES MOINES, Iowa (Legal Newsline) - Iowa Attorney General Tom Miller filed a lawsuit on Tuesday against a Texas membership club over allegations of unfair and deceptive sales tactics.

Stonebridge Benefit Services Inc., a Delaware corporation headquartered in Plano, Texas, allegedly violated Iowa's Consumer Fraud Act and buying club memberships law by charging Iowans monthly fees for unwanted and unused memberships. Buying club memberships law requires that membership sales transactions include disclosures, specified notices and contracts.

"We allege that Iowans have paid for buying club memberships that they didn't know they had and probably never used," Miller said.

Miller alleges that Stonebridge sold more than 50,000 memberships to Iowans, generating net revenues of approximately $4 million. Iowans contacting the Consumer Protection Division claimed that they were enrolled in memberships without their permission or knowledge and that the consumers later discovered that they had been billed for months or even years of unused memberships.

The memberships purport to offer savings on health and wellness products, consumer goods and entertainment expenses. Stonebridge marketed several membership clubs, including Everyday Bargains, Savings2Go, Pet Club and many more.

Miller alleges that in many cases, Stonebridge attracted consumers with free gift card or cash back offers to Iowans who placed online orders through their companies, such as JCPenney, or through telephone orders generated from television infomercials. Consumers were then allegedly enrolled in a membership program and billed monthly, usually without their consent and knowledge. Miller alleges that many of these consumers are older Iowans.

In March, a Polk County judge ordered the Connecticut-based Vertrue Inc. to pay more than $28 million in restitution, costs and penalties in a separate buying club membership case. Vertrue has appealed the judgment.

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