Mobile app settles charges that it didn’t deliver on cash rewards it promised for achieving exercise and diet goals
A mobile app that promised cash rewards to get consumers to commit to fitness and nutrition goals has agreed to settle Federal Trade Commission charges that it falsely promised that consumers who met weekly goals would be paid financial rewards. The app also billed many consumers without their consent.
Consumers who used the Pact app made “pacts” to exercise a certain number of times each week or meet dietary goals, and agreed to be automatically charged an amount, ranging from $5 to $50 per missed activity, if they didn’t complete their pacts. Consumers who met their weekly goals were supposed to receive a share of the money collected from those consumers who didn’t. Consumers’ weekly goals and monetary incentives carried over to the next week unless consumers changed or canceled them.
In its lawsuit, the FTC alleges that the defendants charged tens of thousands of consumers the monetary penalty even when the consumers met their goals or after they canceled the service.
For example, one military consumer complained that the defendants charged her for missed pacts when she couldn’t get the app to recognize the gym at the Air Force base where she was stationed. Another consumer said she deleted her account but continued to be billed more than $500 in recurring charges. The FTC also alleges that the defendants failed to adequately disclose to consumers how to cancel the service and stop recurring charges.
“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.”
As part of the settlement, Pact Inc. and its principals Yifan Zhang and Geoffrey are prohibited from misrepresenting when they’ll charge or make payments to consumers, and from charging consumers without their consent.
The defendants also agreed not to market or sell products that include a negative-option billing feature without clearly disclosing the terms to consumers. In addition, 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.
Pact has already begun the process of returning money to consumers, and, under the terms of the settlement, will notify consumers and complete payments within 30 days of entry of the order.