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Pact Health App Settles FTC Claims of Unfair Billing Practices

Pact Inc. has agreed to pay $940,000 to settle FTC claims that the company operated a mobile health application known as the “Pact app” that does not function as promised and has an unclear auto-renew policy that enables it to continue charging customers after they canceled their service.

The Pact app promised to reward consumers for meeting their fitness goals and to deduct funds from their account when the consumer missed the target. But it did not always work as advertised, according to numerous users, prompting an investigation by the FTC into consumer false advertising claims and allegations that it violated automatic renewal laws.

The health app enables users to make commitments about how many times per week they will exercise, to monitor their food intake during the week, or to eat more vegetables. While enrolled in the service, consumers can be charged if they miss their “pact.” The idea behind the service is that fear of being charged for breaking their commitments will encourage people to stick to their eating and fitness goals.

All the consumers who did meet their goals that week are supposed to share out in the winnings collected from the participants who didn’t achieve targets, but the FTC has tens of thousands of reports that it didn’t play out that way.

According to the Pact app auto-renewal lawsuit, numerous consumers reported to Pact that their gyms were never recognized as just one example. In order to get credit for meeting their targets, those consumers with gym commitments had to “check in.” Thousands of users complained, however, that the application never properly tracked their activity or gym check ins, meaning those consumers were ultimately charged for breaking their commitment.

The bank and payment processor for Pact Inc. alerted the health app’s leadership that so many chargebacks and refunds were being requested that they needed to find an improvement. The company was also assessed fines for going beyond Visa’s chargeback rate.

The Pact app auto-renewal lawsuit argues that the company did not make clear explanations of how consumers could cancel. When customers requested to suspend or cancel their accounts, Pact continued to renew those commitments — and charge when the consumer didn’t meet the goals — regardless. These are the primary claims in the Pact app auto-renewal lawsuit, just the latest in a string of legal claims attempting to hold companies responsible for hard to find or complicated cancellation procedures for subscriptions.

The FTC complaint and the language in what may become a bigger Pact app auto-renewal lawsuit includes allegations of violations of the FTC Act and the Restore Online Shoppers’ Confidence Act, in addition to claims of deceptive business practices.

According to the FTC claims, “negative option features,” which use a customer’s lack of affirmative response or action to serve as an agreement to pay, is an illegal action if those same consumers are not given clear terms about how to cancel the service.

If you have been harmed by auto-renewal terms that were hard to find or unclear, you may be eligible to file a legal claim. Get help from the team of professionals at Bradley/Grombacher today. Fill out the form on this page for a FREE case evaluation.

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