Security & Fraud

FTC Fines Mobile App Pact For Charging Customers Who Met Exercise Goals

The Federal Trade Commission (FTC) announced Thursday (Sept. 21) it had settled with mobile app company Pact which promised cash incentives to consumers who committed to fitness and nutrition goals. Those incentive were never paid out by the health app, and consumers were instead billed without their permission.

According to a press release, the FTC said consumers who used the Pact app and made so-called pacts to exercise a certain number of times per week and/or meet weightloss goals also agreed to pay $5 to $50 per missed activity if they didn’t complete the pacts. Consumers who met the goals were supposed to receive a portion of the money collected by those who failed to meet the goals.

In its complaint, the FTC alleges the app company charged tens of thousands of consumers even when the consumers met their goals or after they cancelled the service. For example, the FTC pointed to one military consumer who complained the app charged her for missed pacts when she could not 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 contends the company failed to clearly 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, in the press release. “Unfortunately, even when consumers held up their end of the deal, Pact failed to make good on its promises.”

The FTC contends Pact and its principals, Yifan Zhang and Geoffrey Oberhofer, violated the FTC Act’s prohibition against unfair and deceptive practices and the Restore Online Shoppers’ Confidence Act (ROSCA). As part of the settlement, impacted consumers will get more than $940,000 in earned cash rewards and refunds for improper charges. The judgment has a total value of $1.5 million with the remainder of the judgement suspended, noted the FTC.

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