SEATTLE (CN) — A Seattle-based company called Pact promises to pay customers who use its app to complete exercising and diet goals, but charges them whether they do it or not, and keeps charging them after they try to cancel, the Federal Trade Commission claims in court.
The FTC sued Pact Inc., a Delaware corporation based in Seattle, and its CEO Yifan Zhang and chief product officer Geoffrey Oberhofer, both of the Western District of Washington, on Sept. 21, for deceptive trade, unfair billing practices, and failure to disclose material terms.
Since 2012 the defendants have distributed a Pact app, “purporting to pay consumers who completed certain health-related activities within a week (such as exercising or meeting dietary goals) as part of a ‘pact,’ and charge only those consumers who did not complete their pacts,” the FTC says in the complaint.
Actually, they charge $5 to $50 per “purportedly missed activity” whether the customers complete them or not, the FTC says.
Pact and its officers “have received at least tens of thousands of consumer complaints about unauthorized charges billed through the Pact app, with many consumers reporting hundreds of dollars of losses in such charges,” the complaint states. They even acknowledge that this is “a known issue.” But that hasn’t stopped them from continuing “to charge (rather than pay) many consumers who have completed their pacts and bill consumers who have attempted to cancel the service, despite continued promises to the contrary. Indeed, rather than altering their claims or taking steps to pay and charge consumers only as promised, defendants have introduced new types of pacts and additional features that suffer from the same issues,” such as an eat-your-vegetables pact, the FTC says.
Nor do they adequately disclose how to cancel the service. To find out how to cancel, customers must click on a link to find the terms of service, “and then scroll through 4,400 words (or 43 screens on an iPhone 5S) of dense text to find the means to stop recurring charges,” the complaint states.
Even when they do figure out how to cancel, Pact continues to charge them, the FTC says.
One customer was charged $300 for two weeks of workouts that the app would not record; another was charged $500 after canceling her account; a third was charged $100 months after she canceled; and a fourth was charged even though she could not log into her account because it had been deleted, according to the FTC.
It seeks an injunction, disgorgement, restitution, refunds, rescission or reformations of contracts, and penalties.