There are few experiences more disconcerting than the sudden onset of déjà-vu — the experience one is doing something they have done before. But when one spends enough time reading the latest and greatest of the payments and commerce news feeds, those déjà-feelings have a habit of recurring, perhaps even a bit more often than the norm. Some players seem a bit more prone to little bits of history repeating than others.
For example, last week we saw Ripple, MoviePass and Wells Fargo make the headlines, all for reasons that felt, well, oddly familiar…
Ripple — The Securities Lawsuits Multiply
Ripple, the startup that developed the XRP cryptocurrency token and is gunning to be the world’s new global financial services network via its xRapid solution, has reportedly been hit with a lawsuit accusing it of securities fraud. The reason one might feel like they’ve read that one before … because they have. This is the third private lawsuit Ripple is facing.
A summary of the lawsuit states, “A private XRP investor alleges that Ripple Labs Inc. and its CEO Bradley Garlinghouse have conflated their token with its proprietary Ripple technology, and even illegally profited from price increases the whole time.”
The essential contention in the suit is that Ripple has created billions of its XRP tokens ex nihilo and made money off them by a sales process that is basically an ongoing initial coin offering (ICO).
“The nature of the XRP’s centralized and mining-free distribution model, all three lawsuits allege, has allowed for a continuous ICO period, in which Ripple Labs Inc. [has] been funding themselves by selling close to $100 million worth of their own cryptocurrency — and that’s just in the last quarter of 2017,” the report said.
Ripple has offered no official response to the newest addition to its series of lawsuits, but responded in May through a spokesperson to the first suit with a statement, noting that, “Like any civil proceeding, we’ll assess the merit or lack of merit to the allegations at the appropriate time. Whether or not XRP is a security is for the SEC [Securities and Exchange Commission] to decide.”
Ripple maintains that its XRP coin should not be classified as a security by the SEC, making XRP a digital currency, which unleashes a whole new set of questions.
MoviePass Is Revising Its Subscription Terms (Again)
MoviePass has taken the last six months to evolve its business model — a lot and publicly. The firm recently announced it will be moving toward a “peak pricing” model that will see consumers taking on additional surcharges if they want to see popular movies at high demand times. The fees will be based on a movie’s showtime and title, and such showings would be highlighted with a lightning bolt icon, Variety reported.
“Peak pricing goes into effect when there’s high demand for a movie or showtime,” MoviePass told subscribers in June. “You may be asked to pay a small additional fee depending on the level of demand. You can avoid the surcharge by selecting a different showtime or movie. Over the coming weeks, we’ll also be introducing Peak Pass, which will allow you to waive one peak fee per month.”
The new peak pricing charges are launching in — as of yet — unspecified select markets. MoviePass noted that the new charges are intended to offset the heavy costs of high-demand films and showtimes created for its subscription-based model, and the desire to “keep their subscription service attractive for users.”
The firm announced it has hit the 3 million paying subscribers milestone, and that it is looking to up that figure to 5 million subscribers by the end of the year. It also noted that its service makes up more than 5 percent of U.S. box office receipts, with its peak weeks around 8 percent of the box office.
MoviePass, though, has hurdles to clear if it is looking for its happy Hollywood ending — as is it is battling back from its parent firm Helios and Matheson stock-bottoming out last month, losing nearly half of its remaining value after the company disclosed in a regulatory filing that it has been losing an average of $21.7 million in cash monthly. The firm also found itself on the end of consumer ire in April when it announced that the subscription plan would no longer allow consumers to see a movie a day, every day of the month. Instead, the service switched to allowing users to see four movies a month for the same $10 monthly cost. The outcry over that pushed them to go back to the movie-per-day payment plan.
However, MoviePass remains determined to disrupt going to the movies, and recently rolled out two other changes to its $9.95 subscription service in June.
The new services allow subscribers to bring a guest by buying their ticket through the app (a service CEO Mitch Lowe teased in an interview with Karen Webster). MoviePass members on any plan will soon be able to access RealD 3D, IMAX 2D or 3D, and other Premium Large Format showings of any film for an additional upgrade fee through its Premium Showings offering. These features are still in the test stages and will be slowly rolled out to all members over the next several weeks.
Ted Farnsworth, head of Helios and Matheson, said the subscription service has enough cash to survive and thrive, and it is determined to push forward.
“There’s been a feeding frenzy of negativity, but it’s not going to slow us down,” said Farnsworth in an interview. “I’m not worried at all. You’re going to see. We’re doing more acquisitions of movies and companies.”
And fundraising. It was announced last week that the company was in the market raising $100 million.
Well Fargo’s Makes Customers Mad (Again)
Wells Fargo is facing a new lawsuit, this time from the Texas jeweler J. Edwards Jewelry Distributing and the company’s president, John Silverman. The firm alleges the banks charged hidden fees to customers who used Wells Fargo’s financing programs to buy with them.
According to Reuters reports, the lawsuit was filed in San Francisco federal court last year. J. Edwards contends that Wells Fargo told retailers to build financing fees into the price of goods and advertise that purchases would be interest-free if financed. The higher price for the jewelry was a hidden double-digit interest charge.
This, the suit contends, is a violation of the Truth In Lending Act (TILA), which requires firms to clearly disclose all fees and financing charges to consumers. The plaintiffs are pursuing a class action case so the lawsuit can cover more than 5,000 retailers around the country. The suit further contends that, while retailers marketed the financing plans offered through the bank, Wells Fargo controlled how merchants could talk about the programs. Retailers were directly told not to charge a fee for Wells Fargo customers, but to increase their prices so that the fees were rolled in.
In one case, the retailers were told to advertise “$3,000” for a ring that a customer could pay zero interest on if it was paid off in 60 months. The retailer would then agree to pay Wells Fargo 22.5 percent of the cost. If the customer paid for the same ring with cash, it would cost $2,325. The lawsuit contends that the consumers would have saved $675 but for the undisclosed financing fees.
Wells Fargo likely earned around $800 million annually from those hidden fees.
The latest suit comes on the heels of Wells’ most recent settlement over fees. In June, the bank announced it had received final approval from a California court to settle a class action suit. The $142 million suit sought to compensate customers impacted by a sales scandal, Reuters reported. Wells Fargo CEO Tim Sloan called the announcement “a significant step forward in making things right for our customers and restoring trust [of all] Wells Fargo’s stakeholders.” Customers had until Saturday (July 7) to claim their funds.
It seems, according to some retails, Wells Fargo may have some steps left to take.
So, the lesson of the week? It’s déjà vu all over again. Have a great week!
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