SANTA MONICA—Los Angeles County District Attorney Jackie Lacey revealed on February 4 that the direct marketing company Guthy-Renker LLC agreed to pay $8.5 million and adjust its sales practices to settle a civil lawsuit alleging unlawful automatic payment renewals.
“As new technologies are changing the consumer environment, we must ensure that businesses do not abuse these tools,” said District Attorney Lacey said. “This settlement will help protect the public from unauthorized payment renewals and should serve as a warning to other companies that would violate consumer protections.”
Prosecutors with the LADA’s Office and other members of the California Auto Renewal Task Force (CART) discovered that the company failed to properly disclose automatic charges resulting from Wen hair care products and Proactiv acne prevention purchases made on their websites. Under state and federal law, online businesses have to clearly and clearly disclose all automatic renewal charges and terms in addition to get affirmative consent of those recurring charges from the consumer.
Santa Clara County Superior Court Judge Helen E. Williams approved the settlement on February 1. The El Segundo-based firm will pay $1.2 million in penalties and close to $7.3 million in restitution to customers who had automatic charge renewals to their accounts without their consent.
Customers eligible for restitution are Wen customers who were charged after May 2012 and Proactiv customers who were charged between July 2014 and August 2016. Guthy-Renker will send out restitution notices to impacted customers.
Guthy-Renker paid close to $8 million to settle another recent lawsuit over automatic renewals, for buyers of Proactiv products prior to July 2014. During that class action case, Habelito v. Guthy-Renker LLC, the company paid out $2.5 million in restitution and over $5 million in attorneys’ fees to the plaintiffs.
Under the terms of this settlement, the company is required to:
-Clearly and conspicuously disclose the automatic-renewal terms;
-Get consumers’ affirmative consent for the automatic-renewal terms through a separate checkbox;
-Send consumers a clear summary of the automatic-renewal terms after they pay; and
-Allow consumers to easily cancel the subscriptions.
“Automatic renewal is one of the critical areas in consumer protection today,” said Santa Monica Chief Deputy City Attorney Adam Radinsky, head of the Consumer Protection Division. “Consumers always have the right to know where their money is going.”
“The Santa Monica City Attorney’s Office is committed to protecting consumers from unfair and unlawful business practices,” said Santa Monica City Attorney Lane Dilg. “This joint effort is an important victory to ensure that consumers will not be subject to recurring charges without their clear approval.”
Other members of CART include the Santa Monica City Attorney’s Office and the Santa Clara County, San Diego County and Santa Cruz County district attorney’s offices.