The developers of Pact, a mobile health app that vowed to pay its users cash incentives for meeting fitness and nutrition goals, agreed to pay $940,000 to settle Federal Trade Commission allegations they falsely promised the rewards.
Consumers who used the app made "pacts" to exercise a certain number of times per week or meet specific dietary goals. Under the program, those who didn't meet their goals would be charged a predetermined amount ranging from $5 to $50 per missed activity. If a user met a weekly goal, the app was supposed to send the user a share of the money collected from those who failed to fulfill their pacts.
An FTC complaint filed Sept. 17 alleged the app charged tens of thousands of consumers, even when they met their goals. It also claimed the app unfairly billed consumers without their consent by charging some users after they canceled the service. According to the FTC, Pact did not adequately disclose to its users how to cancel service.
"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 Thomas 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 terms of the settlement, Pact will pay its consumers more than $940,000 in earned cash rewards and refunds for improper charges. The $940,000 settlement is part of a $1.5 million judgment, the rest of which is suspended. The app developers also agreed to no longer market or sell products that include a negative-option billing feature without clearly disclosing terms to consumers.
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