FTC Announces $2M, $6M Settlements in Consumer Fraud Cases

Online shoe retailer Hey Dude will pay $1.95 million to settle charges it violated the FTC's mail, internet or telephone order merchandise rule multiple times from 2020 to 2022, said the agency in a Monday news release. The e-tailer “misled consumers” by suppressing over 80% of reviews that failed to provide four or more stars out of a five-star rating system, said the FTC. It also didn’t issue shipping delay notices when it couldn’t fill consumers’ orders on time; failed to cancel orders and issue prompt refunds; and issued gift cards instead of sending “prompt refunds of the original payment” for merchandise ordered but not shipped, the agency said. In many instances, the company rejected and didn’t publish negative reviews, in violation of the FTC Act, it said. A proposed court order (docket 2:23-cv-01412) in U.S. District Court for Nevada would prohibit Hey Dude from making misrepresentations about consumer reviews by requiring it to publish all reviews it receives, including those previously withheld from publication, with limited exceptions related to inappropriate content, it said. The FTC expects to use the $1.95 million penalty to provide refunds to consumers harmed by its actions. In another settlement, TruthFinder and Checkmate will pay $5.8 million to settle charges they deceived consumers about whether consumers had criminal records through their background reports services and failed to ensure sufficient accuracy of their consumer reports, said the FTC Monday. The companies make “millions” from monthly subscriptions using push notifications and marketing emails that claimed the subject of a background report had a criminal or arrest record “when the record was merely a traffic ticket,” said the complaint. When a customer flagged an item in a background report as inaccurate, the companies didn’t take steps to investigate, modify or flag information, the FTC said. The companies also violated the Fair Credit Reporting Act (FCRA) by providing background reports to people who didn’t have a permissible purpose to obtain them and failing to limit who could get them. They also tried to bump the number of their positive user reviews by offering a free premium background report in exchange for a positive review on the HighYa review site, the agency said. Under the FTC’s proposed order, the companies would be required to have a monitoring program to ensure compliance with the FCRA, stop misrepresenting the accuracy of their reports, comply with the FCRA when operating as credit reporting agencies and disclose endorsers with “material connections.” Both orders require federal judge approval.