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Why was a scam company able to raise $76 Million Series B?

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Re: Why was a scam company able to raise $76 Million Series B?

#151

Post by jdh »

reitzensteinm wrote: post #7

So I went through their checkout process, and up until the credit card stage there is zero indication that it's a membership site (I read everything on every page). I've uploaded the credit card section here: http://i.imgur.com/3di93.png It says you'll be billed month per month on the right hand side under the VIP membership program, but I think it's pretty clear that the page is engineered to be misleading. It looks…

Regarding your comment: "It says you'll be billed month per month on the right hand side under the VIP membership program, but I think it's pretty clear that the page is engineered to be misleading."

I'm sorry: you're talking about the section that explains "How the JustFab VIP Program Works"? Whose 4 bullet points say:

1. Get a boutique the first of the month 2. Browse and Buy 3. Don't like anything, skip 4. If you don't buy or skip by the 5th you'll be charged anyway?

And a default unchecked box that you read and agree?

I think the concept of "engineered to be misleading" might just put the points in say, a small font, or in the terms and conditions behind a link. If someone describes it clearly in bold font in a section explaining how the site works, well, that's a pretty strange way of misleading people.

Re: Why was a scam company able to raise $76 Million Series B?

#152

Post by lmm »

kylebrown wrote: post #117
tisme wrote: post #9

Don't ask for a refund, go to your bank or CC company and charge back the 6 months. That'll hit them where it hurts. Little known fact about chargebacks: the merchant pays an administration fee, typically $20 to $50. Per charge! That is why the smarter scammers refund to everybody who complains, not refunding is plain dumb. This scam has been around for a long time, usually it's adult companies that sell you a 'free'…

Banks and, at least VISA, are not as quick to do chargebacks they used to be. Now, they'll only do them if the customer says their card was stolen. Found this out when my mother was scammed by a moving company for the 50% deposit (company never showed). She called the number on the back of the card to dispute the charges (I believe its the bank's customer service number, not VISA's). But the bank told her they couldn…

Debit cards (which from the way you're talking about a bank it sounds like this was) are like that. It's why your best practice is to always use a credit card when buying things (it's not like it costs you anything, as long as you have the discipline to not run up a bill you can't pay).

(disclaimer: I'm not from the US)

Re: Why was a scam company able to raise $76 Million Series B?

#153

Post by thaumaturgy »

nikcub wrote: post #111
chinmoy wrote: post #109

Earlier quoted context omitted.

Then again since when TechCrunch really practiced journalism?

https://www.google.com/search?q=scamville led to an entire industry being changed

[2009]

C'mon, you really don't think TC is well on its way to being Valleywag II? With articles like the recent, "Color CEO Bill Nguyen Checks Out Of Day-To-Day Operations..."?

Re: Why was a scam company able to raise $76 Million Series B?

#154

Post by jdh »

serkanh wrote: post #66

I really don't understand how companies are able to do this, based on how stringent credit card processors are when it comes to chargebacks. With this type of misleading selling tactics i would expect JustFab to have chargebacks well above acceptable standarts of CC processors.

Right. Let's consider the possible hypothesis that the customers like the service and know what they're getting into, and thus chargebacks aren't above average (which is the actual case with this company.)

Chargebacks don't lie, not at this scale. If customers were being scammed, they wouldn't be able to process cards.

Re: Why was a scam company able to raise $76 Million Series B?

#155

Post by flexxaeon »

jdh wrote: post #149

Biased answer but with some facts: I'm an investor in the company, and many here on HN know me personally. JustFab is not a scam, and I would not be involved with it if it was -- indeed it's a spectacular and very consumer friendly company that I'm proud to be a part of and I think will be a great success. This comment thread has been quick to conclude that it is a scam, on some fairly sketchy evidence. While I don't…

I wouldn't call it a scam, but it's very cleverly worded and benefits from (or takes advantage of) impulsive or rushed buys. Things like "complete checkout" but not "and join" on the button for example. It's more a matter of ethics.

Asked the wife if she heard of the site and she recounted a tale similar to the OP, albeit not spanning 8 months, only 2-3. And as I had assumed, was able to get shoes for the months she was charged for before she cancelled...which is cool. But, again, it wasn't overly obvious to her either. And my wife is a smart (and CHEAP) woman who would notice an unobsured message that she'd be billed once a month.

Re: Why was a scam company able to raise $76 Million Series B?

#157

Post by tripzilch »

jdh wrote: post #151
reitzensteinm wrote: post #7

So I went through their checkout process, and up until the credit card stage there is zero indication that it's a membership site (I read everything on every page). I've uploaded the credit card section here: http://i.imgur.com/3di93.png It says you'll be billed month per month on the right hand side under the VIP membership program, but I think it's pretty clear that the page is engineered to be misleading. It looks…

Regarding your comment: "It says you'll be billed month per month on the right hand side under the VIP membership program, but I think it's pretty clear that the page is engineered to be misleading." I'm sorry: you're talking about the section that explains "How the JustFab VIP Program Works"? Whose 4 bullet points say: 1. Get a boutique the first of the month 2. Browse and Buy 3. Don't like anything, skip 4. If you…

The misleading part is that (in at least one common usage path), the site sets itself up to look like every other online shopping site. The kind that people expect to use by putting stuff in their "shopping cart" and proceed to "checkout" and pay once.

Think of the people in your life not quite as tech-savvy as yourself, like maybe your next-door neighbour or your mother. Would you expect them not to be misled by this? Sure, I'd hope my mother would be critical enough to notice, but I can easily see it happen otherwise.

Another indication is, I assume that a lot of people who do notice will instead decide to bail out entirely and not buy anything, rather than (like I would do, if I really wanted the item) pay, log in, and cancel the account immediately. Because that's not really an obvious thing to do, given the set expectation of being a regular online shopping store.

Re: Why was a scam company able to raise $76 Million Series B?

#158

Post by omarchowdhury »

tzs wrote: post #131
tisme wrote: post #9

Don't ask for a refund, go to your bank or CC company and charge back the 6 months. That'll hit them where it hurts. Little known fact about chargebacks: the merchant pays an administration fee, typically $20 to $50. Per charge! That is why the smarter scammers refund to everybody who complains, not refunding is plain dumb. This scam has been around for a long time, usually it's adult companies that sell you a 'free'…

However, be careful and only do a chargeback when you are sure you never want to deal with that merchant again. Many will blacklist you if you do a chargeback, because of that high chargeback fee (which they have to pay even if they have sufficient documentation to successfully fight the chargeback). I'm kind of surprised no one has started a service for merchants to warn them of chargeback prone customers (there are…

There was one, it was called BadCustomer. I don't think it's around any longer, since the people running were running shady rebill scams like Fab.

Re: Why was a scam company able to raise $76 Million Series B?

#159

Post by antonej »

Confusion wrote: post #125
mseebach wrote: post #88

Earlier quoted context omitted.

Don't forget that doing a chargeback doesn't absolve you from having to pay for services you've legitimately signed up for, it just denies the parties the convenience of settling through the credit card companies. They can take you to court for breach of contract, and if (IANAL) the subscription contract is found to be legit, you have to pay + fees.

They'll argue you checked the checkbox. You'll argue you didn't. It's their word against yours and they will lose, because they can't prove you actually checked the checkbox.

How hard can it be to retain this data upon registration? Site operators would be insane not to. It's one bit per user in a database: Checked box or not?

Re: Why was a scam company able to raise $76 Million Series B?

#160

Post by robryan »

reitzensteinm wrote: post #16
robryan wrote: post #14

Earlier quoted context omitted.

So the site doesn't force you to join the VIP program? The way it is structured would definitely see a lot of people check it and click through without checking. In my experience stuff we make a lot more obvious than this is plain ignored during checkout.

Just tried it without the checkbox ticked, and it does appear to be mandatory. "You must read and agree to the JustFab VIP Membership Terms of Service." Which makes sense - I bet they're making a killing on zombie subscription fees and little on legitimate users.

Even that line which you say comes up when you don't check the box is likely to be misread by users who are used to having to check a terms of service box on most of everything.
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