Mobile app vendor agrees to $940K FTC settlement

Agency alleges that company failed to pay cash rewards to consumers for meeting health goals.

Pact, a mobile app vendor that promised cash incentives to get consumers to meet fitness and nutrition goals, has agreed to settle Federal Trade Commission allegations that it falsely promised to pay financial rewards as well as unfairly billed them without their consent.

Under the FTC settlement, consumers will receive more than $940,000 in earned cash rewards and refunds for improper charges as part of a $1.5 million judgment—the rest of which is suspended.

“Consumers who used this app expected the defendants to pay them rewards when they achieved their health-related goals, and to charge them only when they did not,” said Tom Pahl, acting director of the Bureau of Consumer Protection. “Unfortunately, even when consumers held up their end of the deal, Pact failed to make good on its promises.”

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In its compliant, the FTC alleged that consumers have “suffered substantial injury” as a result of Pact’s violations of the FTC Act’s prohibition against unfair and deceptive practices and the Restore Online Shoppers’ Confidence Act, which prohibits using a negative option feature to charge consumers for goods or services unless the material terms of the transaction—including the method to stop recurring charges—are clearly and conspicuously disclosed before obtaining consumers’ billing information.

As part of the settlement, Pact is prohibited from misrepresenting the circumstances under which they will charge or make payments to consumers, and from charging consumers without their express, informed consent. The vendor also agreed not to market or sell products that include a negative-option billing feature without clearly and conspicuously disclosing the terms to consumers.

According to the FTC, Pact has already begun the process of returning money to consumers and under the terms of the settlement must notify consumers and complete payments of more than $940,000 within 30 days of entry of the order.

Pact executives were not immediately available for comment.

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