Online clothing, shoe retailer agrees to $1M settlement over deceptive billing, Michigan AG announces

LANSING, Mich. (FOX 2) - An online clothing retailer accused of deceptive billing and advertising agreed to a $1 million settlement after multiple states, including Michigan, took action against the company.

According to Michigan Attorney General Dana Nessel, TFG Holding, Inc. engaged in misleading practices across its brands, including JustFab, ShoeDazzle, and FabKids. 

One of the websites run by the involved company, TFG Holding, Inc.

The company is accused of deceptively marketing its VIP Membership Program and then making it hard to cancel. According to Nessel, the company offered a discount for enrolling in the VIP Membership Program. Once enrolled in the program, customers are charged $49.95 a month, unless before the sixth day of each month, they make a purchase from the company or log into their membership accounts to "skip" the charge. Monthly charges would accrue accounts in the form of store credits, which can be used on future purchases.   

Nessel said the company violated state consumer protection laws by:

• Misrepresenting the price consumers could expect to pay for products advertised on the company’s websites;
• Automatically enrolling consumers, without their consent, into a Membership Program that included a recurring charge without consumers’ knowledge, consent, or authorization;
• Implementing and maintaining cancellation policies and practices that frustrated consumers’ ability to cancel the VIP Membership Programs into which they were enrolled; and
• Failing to adequately disclose material facts to consumers, including that by purchasing products they will be enrolled in the VIP Membership Program.

What's next:

As part of the settlement agreement, TFG Holding must:

• Comply with all applicable local, state, and federal laws, regulations, or rules;
• Clearly and conspicuously disclose the material terms of its VIP Membership Program, including but not limited to, the fact that consumers will be enrolled in the VIP Membership Program, the amount and frequency of all applicable recurring charges, and the consumers’ right to cancel;
• Refrain from representing its offers or sales of its products as time sensitive, when they are not, including but not limited to the use of countdown timers to represent or imply that such offers or sales will soon expire, unless the offers are in fact time limited;
• Obtain the consumer’s express informed consent prior to enrolling any consumer in the VIP Membership Program;
• Provide a simple online mechanism for consumers to cancel their VIP Membership Program and promptly accept and process any request by a consumer to cancel their VIP Membership Program and stop the billing and collecting of payments for any recurring charge;
• Promptly honor consumer cancellation requests and cease any further billing;
• Provide all consumers the opportunity to request and obtain a refund of any recurring charge balance accrued within the preceding year; and
• Cease the billing of recurring charges to any consumer who enrolled in the VIP Membership Program prior to May 31, 2016, unless the consumer previously skipped a payment, redeemed a credit, received a refund, or made an additional purchase.

The company must also pay automatic restitution to customers impacted by the illegal billing practices:

• Consumers who enrolled in a VIP Membership Program prior to May 31, 2016, and only made an initial purchase but no subsequent purchases and never skipped a payment;
• Consumers who have an existing eligible complaint against the company that has not been resolved, and to consumers who file a new eligible written complaint with the company or the Attorney General’s office within 90 days of the Effective Date of the settlement that was not previously resolved; and
• Pay $1 million to the jurisdictions involved in the investigation to cover the costs of investigation or to be used for future consumer protection purposes.

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