Blue Hippo
The services offered by Blue Hippo have been poignantly characterized as both sleazy and a $15 million scam. Whether this turns out to be an accurate depiction may depend on the ability of the company to act responsibly to court orders prompted by Federal Trade Commission investigations.
The company offers computer layaway plans to a primarily low-income customer base, and offers Blue Hippo financing for the layaway and to ship a computer to customers after 13 weeks, depending on the payment history of the customer. If the customer has a pay record that is not favorable, then for a $99 sign-up fee and a weekly payment of $36 to $88, the customer can have his computer after a full year – when the computer is completely paid off. This means that on the average, a customer is paying roughly $1,200 for a computer that it takes a whole year to pay for.
To be fair, the BlueHippo plan is not so different from many weekly furniture and appliance rental outlets – except that in those outlets, the customer is allowed to take the merchandise with him right away.
What the two methods of computer ownership have in common is the fact that at the end of the payment period, the customer has paid significantly more for the computer than he would have if he had saved his money over months and bought the computer through traditional channels. What is even more self-defeating is the customers are buying computers that have depreciated and have only 40 GB of hard drive memory. Therefore, the average customer is investing in an inferior product from the very start of a BlueHippo transaction.
What has been seemingly disturbing to the Federal Trade Commission (FTC) and the countless numbers of customers who have leveled complaints is many of the customers have reported never receiving a computer even after they successfully met payment terms. This is the main reason the FTC launched a probe in the first place.
In 2008, after intense FTC scrutiny, Blue Hippo agreed to reimburse customers who had never received their computers. The company was required to place $5 in an account for restitution. This plan would have been an almost perfect solution, had BlueHippo stuck to its part of the deal. After the 2008 exposure, though, the company went back to business and usual and continued to accept payments from customers without sending computers.
It was only after Blue Hippo discovered a second probe to monitor progress in 2009 that the company began to order computers that would go to customers. The FTC had discovered that in the year since the court-ordered injunction, Blue Hippo had only deliver one computer total to one customer out of the 35,000 customers who had entered an agreement for the layaway plan. In that one-year span, the company collected an estimated $15 million.
The FTC filed another injunction, and BlueHippo responded by order more than 4,000 computers – many of which went to customers who had not met the 13-week payment agreement. It looked to the FTC to be quite a reactionary response and not one filled with good will.
Blue Hippo had also failed to submit a required report to the FTC based on the original court order. A judge fined the company $2,500 per day until the report was filed. Blue Hippo submitted a report after five days, but the judge considered it so shoddy, that he placed an additional $5,000 per day fine on the company to submit a proper report.
In November 2009, after a very tarnished reputation, excessive fines and a bank account that was frozen by the FTC, BlueHippo filed for bankruptcy. Company leaders have said they believe the move by the government to freeze assets is unlawful and such a move prevented them from repaying both its 50 to 99 creditors and the customers who had been left with no computers. Blue Hippo has listed its assets as being worth between $10 and $50 million. Across the country, approximately 4,154 complaints have been filed with Better Business Bureau locations in different states.
Despite all the unfavorable publicity, Blue Hippo is still maintaining that it plans to “restructure” the company as quickly as possible. Restructuring could mean several different directions for the company. Its operators could choose to start another company under an entirely different name. It could modify its program offerings to change how participants receive computers.
Blue Hippo could come up with a legitimate complaint and recovery process for its customers to help ensure they get what they have paid for. Such a plan would be nothing less than honorable, if indeed the company is able to salvage its assets and reputation following the injunction and seizure of assets. The world will have to wait and see if this setback is permanent or a necessary way to make sure everyone who pays for a computer receives a computer.
