Attorney General Nessel Secures Settlement with Online Clothing Retailer Regarding Deceptive Advertising and Billing Practices

LANSING – Michigan Attorney General Dana Nessel today announced a $1 million multistate settlement with TFG Holding, Inc., an online clothing retailer that offers shoes, clothing, and accessories across several different brands, including JustFab, ShoeDazzle, and FabKids. The settlement resolves claims that the company deceptively marketed its VIP Membership Program to consumers and then made it difficult for consumers to cancel their memberships. 

“Consumers deserve clear information about the memberships they sign up for, and they should be able to cancel and stop paying for ones they didn’t mean to buy or just don’t want anymore,” Nessel said. “My office remains committed to working with attorneys general across the country to protect residents from deceptive business practices.”

TFG Holding, Inc. offers consumers discounted pricing if they enroll in the company’s VIP Membership Program. Once enrolled in the program, consumers are charged $49.95 a month, unless before the sixth day of each month, consumers make a purchase from the company or log into their membership accounts to “skip” the charge.  The monthly charges accrue in the consumers’ accounts in the form of store credits, which can be used on future purchases.  

The settlement alleges that TFG Holding, Inc. violated state consumer protection laws in multiple ways, including by:

• Misrepresenting the price consumers could expect to pay for products advertised on the company’s websites;
• Automatically enrolling consumers, without their consent, into a Membership Program that included a recurring charge without consumers’ knowledge, consent, or authorization;
• Implementing and maintaining cancellation policies and practices that frustrated consumers’ ability to cancel the VIP Membership Programs into which they were enrolled; and
• Failing to adequately disclose material facts to consumers, including that by purchasing products they will be enrolled in the VIP Membership Program.

Under the terms of the settlement, TFG Holding, Inc. is required to:

• Comply with all applicable local, state, and federal laws, regulations, or rules;
• Clearly and conspicuously disclose the material terms of its VIP Membership Program, including but not limited to, the fact that consumers will be enrolled in the VIP Membership Program, the amount and frequency of all applicable recurring charges, and the consumers’ right to cancel;
• Refrain from representing its offers or sales of its products as time sensitive, when they are not, including but not limited to the use of countdown timers to represent or imply that such offers or sales will soon expire, unless the offers are in fact time limited;
• Obtain the consumer’s express informed consent prior to enrolling any consumer in the VIP Membership Program;
• Provide a simple online mechanism for consumers to cancel their VIP Membership Program and promptly accept and process any request by a consumer to cancel their VIP Membership Program and stop the billing and collecting of payments for any recurring charge;
• Promptly honor consumer cancellation requests and cease any further billing;
• Provide all consumers the opportunity to request and obtain a refund of any recurring charge balance accrued within the preceding year; and
• Cease the billing of recurring charges to any consumer who enrolled in the VIP Membership Program prior to May 31, 2016, unless the consumer previously skipped a payment, redeemed a credit, received a refund, or made an additional purchase.

As part of the settlement, the company will also be required to:

• Provide automatic restitution to all consumers who enrolled in a VIP Membership Program prior to May 31, 2016, and only made an initial purchase but no subsequent purchases and never skipped a payment;
• Pay restitution to consumers who have an existing eligible complaint against the company that has not been resolved, and to consumers who file a new eligible written complaint with the company or the Attorney General’s office within 90 days of the Effective Date of the settlement that was not previously resolved; and
• Pay $1 million to the jurisdictions involved in the investigation to cover the costs of investigation or to be used for future consumer protection purposes. 

The settlement was negotiated by the District of Columbia, Pennsylvania, Maryland, and Texas. In addition to Michigan, the other states joining the settlement are Alabama, Arkansas, Colorado, Connecticut, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Minnesota, Mississippi, North Carolina, North Dakota, New Hampshire, New Jersey, New Mexico, Nevada, Ohio, Oklahoma, Oregon, Rhode Island, Tennessee, Vermont, Washington, and Wisconsin.

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