Santa Clara County: Stamps.com to pay $2.5 million to settle Consumer lawsuit
An enterprising Santa Clara County prosecutor who successfully sued two businesses last year for violating consumer-protection laws has scored again, this time with a $2.25 million settlement for misleading advertising against Stamps.com.
The company, a U.S. Postal Service-approved vendor, was enticing customers with what appeared to be a "no-risk" trial, prosecutor Francisca Allen said. However, the website failed to clearly disclose that consumers who participated in the trial were then automatically charged a monthly service fee of $15.99, regardless of whether they continued to purchase stamps online and print them out on their computers, she said.
California law requires that such disclosures be "clear and conspicuous" so consumers are aware of all the terms and conditions before they agree.
"The law seeks to make sure consumers are protected and avoid hidden costs of an automatic enrollment or subscription service," Allen said. "Sometimes such services are difficult to get out of. Sometimes people don't even notice they are paying for the service at all."
Stamps.com is used primarily by small businesses, Allen said. Before the service was available online, businesses could pay a monthly fee for a postage meter, a machine that prints an official mark or signature on a letter or parcel to indicate that postage has been paid.
The settlement will be split equally between Santa Clara and Santa Cruz counties, which sued jointly. Allen worked on the case with her husband, Santa Cruz deputy district attorney Douglas Allen.
Both counties will use the settlement to investigate and, when necessary, prosecute companies that violate laws protecting consumers. Stamps.com also will pay up to $1.5 million in restitution to California customers it misled. The customers will be notified in coming months.
The settlement is the latest legal victory for Francisca Allen, who has worked for the Santa Clara County District Attorney's Office for more than 20 years.
She was the prosecutor who responded to a TV news report alleging food safety violations by Sysco by organizing a 10-county lawsuit that last summer resulted in a $19.4 million settlement.
Allen also won a $1.8 million settlement last year from online retailer JustFab, an El Segundo-based company that also did not "clearly and conspicuously" explain that its advertised discounts require a monthly, automatically charged subscription fee. That settlement also was split equally between Santa Clara and Santa Cruz counties.