If you live in the U.S., you may remember seeing ads for a company called BlueHippo.  Founded in 2004, they bill themselves as a company that provides computers to the poor.  The financially challenged can obtain a computer through BlueHippo if they agree to a somewhat convoluted, though appealing, lay-away / credit contract.  Thousands of customers found what BlueHippo was offering appealing enough that they signed up to buy computers through this company that was such a friend to the poor.

In fact, it seems that key details of the deal BlueHippo offered consumers is complicated, unconventional, and just plain quirky enough to make one suspicious.  The trick, of course, is that BlueHippo didn’t disclose these aspects of the contract to it’s customers.  Customers only found out about the many loopholes, provisions, exceptions, and other complications once they either met the requirements and were expecting to receive the actual computer they had purchased, or once they asked BlueHippo for a refund.  Both turned out to be problems.  According to the U.S. Federal Trade Commission, BlueHippo simply wasn’t in the business of actually shipping any computers to it’s paying customers. And those trying to get a refund could only obtain “store credit”.  That store credit was complicated by company fees and other red tape.  Also, it was store credit at a company that doesn’t send consumers any actual products. (That’s, you know, kind of a problem.)

According to FTC documents, BlueHippo’s contract with consumers involves sending the company 13 small weekly payments, all of which are under a hundred dollars.  Seems reasonable, right?  It immediately occurred to us here at Wandering Goblin that this system was highly unconventional, since the payments are weekly, not monthly.  (Really, what else is financed in this unconventional way?)  Sadly, consumers soon realized that their small $88 dollar payment means forking over more than $350 a month to BlueHippo.  Remember, these computers are marketed to lower income brackets.   However, even after consumers made the first 13 required payments, for the first four years of its existence, the company still never actually sent any consumers any computers.  None.

In 2008, the FTC took BlueHippo to court.  In the settlement, BlueHippo agreed to provide a $5 million relief fund for it’s former customers, and would discontinue their deceptive practices.  BlueHippo then continued their deceptive practices without even a pause throughout the rest of 2008, collecting millions in revenue from more than 35,000 customers, according to FTC documents.  During that period of time, BlueHippo shipped one computer – one – to a customer.  The FTC believes that this was actually an error, and that they didn’t intend to ship even that single machine out the door: “…But the company provided, at most, a single financed computer, failing to provide financed computers even for 2,477 customers who managed to meet the companies’ conditions.”

A year after the initial settlement with the government, the FTC again took BlueHippo to federal court.  Quite suddenly, BlueHippo decided to try something new and unprecedented – it shipped computers to its paying customers.  Of course, not everyone got a computer.  They actually sent out less than 1,500 computers, which the FTC believes was mere window dressing.  BlueHippo simply wanted to appear to comply with the first court order.  The FTC wasn’t buying it.

There are, of course, other problems.  For the small minority of customers that received an actual computer from BlueHippo, there were extraordinary delays.  According to the FTC, these delays extended outwards of  6 months, instead of the 3 to 4 weeks shipping that the company promised.  However, consumers were expected to continue to send Blue Hippo payments until the computer was completely payed off.

For your reading pleasure, we decided to include a few choice quotes from the FTC, each of which gives a feel for the extent of the BlueHippo ripoff of its customers.

Blue Hippo “offered to extend credit to consumers to finance purchases of personal computers and other consumer electronics with down payments of $99 to $124, and a year of weekly or bi-weekly payments ranging from $36 to $88. BlueHippo promised to deliver the product once the consumer made 13 weekly payments.”

“Even after this settlement order was entered by the court, BlueHippo continued to deceive consumers.”

“Originally due in October 2008, by April 9, 2009, BlueHippo still had failed to provide this required report, despite the FTC’s repeated requests and BlueHippo’s repeated assurances that it would do so…and failed to respond to written demands for reports and documents issued by the FTC on March 9, 2009…the  Court ordered BlueHippo to pay $2,500 per day until it provided a compliance report. BlueHippo provided the report five days later resulting in a total sanction of $12,500…The Court imposed an additional daily sanction of $5,000 per day commencing May 1, 2009 [because BlueHippo’s failed to provide the actual information required and] The Court fined BlueHippo $20,000 before it provided sufficient information to convince the court to lift the sanction.”

“Contempt Defendants aggressively advertise BlueHippo as a company in the business of financing computers for credit-challenged consumers. However, this representation is patently false. Indeed, in the year following entry of the Order, Contempt Defendants financed – at most – only one computer for more than 35,000 customers.”

“BlueHippo did not even order – let alone ship – the computers within the three- to four-week time frame the company had advertised.”

“Contempt Defendants compound the harm caused by BlueHippo’s failure to finance computers by failing to disclose fully the onerous conditions of its store credit refund policy, thereby rigging their refund policy to avoid giving anything back to consumers lured into BlueHippo’s money pit.”

“Defendants still failed to provide computers to nearly 41% of those who qualified [and paid BlueHippo]. In total, these 1,015 consumers paid Contempt Defendants $844,968.15.”

In a nutshell, it seems that BlueHippo has some serious problems with the FTC and, presumably, the Justice Department.  If the FTC’s claims are to be believed, BlueHippo has been in the business of exploiting the most vulnerable members of society – fundamentally, ripping off the poor – for a very long time.  We eagerly await the outcome of this episode.

[Sources: 1, 2, 3, 4]

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