Blue Hippo Scam Exposes Gateway Computers
May 13th, 2008
By Linsey B. Knerl
You've probably seen the commercials for Blue Hippo during late night paid programming or after a reality court case. For as little as $99 down, customers with no credit or bad credit are given the opportunity for guaranteed approval of computer financing. The company touts itself as a last option for buyers who don't qualify for traditional computer layaway plans, and guarantees that no credit check is involved.
As you can guess, a guarantee like this can only come at a premium. While the brands offered through Blue Hippo are from reputable companies such as Gateway, HP, and Lenovo, the total cost to consumers is almost 5 times the retail value. So how does a company like Blue Hippo stay in business? According to a recent article by Consumeraffairs.com, customers agree to make an initial payment, and have all subsequent payments deducted from their banking accounts. Only after 13 weeks of satisfactory payments will the computer be shipped to the customer.
If this wasn't a rotten-enough deal, many customers have complained of not getting the computer at all, even after meeting all the requirements of the pre-payment contract. As a result of the high number of formal complaints, the FTC stepped in and charged Blue Hippo $5 million for numerous violations. These included “failing to clearly and conspicuously disclose their policy of not providing refunds before debiting accounts, in violation of the FTC Act, and giving consumers no opportunity to make a timely and informed decision about whether or not to risk the potential loss of advance payments.”
But the story doesn't end here.
Gateway computers could be named as a defendant in an upcoming class-action lawsuit against Blue Hippo. The lawsuit, which was first filed in 2006, blames Gateway for its involvement in the Blue Hippo scams. Gateway had an exclusive deal with the company from 2003 until 2007, and allowed the use of its logos on Blue Hippo ads and offers. BusinessWeek interviewed Gateway spokesman David Hallisey a year ago, who then said, “We've clearly been aware of their business model from the get-go.”
As court proceedings continue, Gateway may become further entrenched in the scandal, despite the fact that it has since parted ways with Blue Hippo. The State Attorney General in Florida, West Virginia and Illinois are pursuing damages from Blue Hippo, which has already settled fines with the Maryland Attorney General and Federal Trade Commission in the past year.
The business model of Blue Hippo is no longer unique, as more and more companies attempt to follow in the company's footsteps. While the rent-to-own setup in itself isn't evil, it isn't the best way for consumers to make purchases. With interest rates high and minimum payments low, many computers lose their values long before they get paid off, leaving buyers “upside-down” on their loans quickly after they enter into the agreement.
Consumers are encouraged to report any unorthodoxed buying experiences from Blue Hippo, or any other computer reseller, to their local Attorney General and the FTC. Oh, and don't forget to tell us all about it here at Consupo!
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