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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?

#81

Post by mapster »

ricardobeat wrote: post #34
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…

Maybe I'm being too permissive, but that screen doesn't look fishy at all. I went through the purchasing/sign-up process, and it goes like this: 1. create a profile (answer questions on style) 2. fill in details, click a *JOIN NOW* button 3. get a "*first month* for 50% off" offer 4. get to this payment screen At no point it implies you are buying a single product, there are no "buy now" buttons or calls to action. T…

Logged on and signed up. selected a shoe by clicking 'add to bag', aka 'add to cart' then went to checkout whereby I was introduced to the slimy payment page.

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

#82

Post by antidoh »

pbj wrote: post #46
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'…

This is the best suggestion, but unfortunately may not be possible for them to recover everything depending on how they paid/their credit card company. Most banks only allow you to do a chargeback for charges within the last 1-2 months on debit purchases and 6 months on credit card purchases.

Do the 1-2 month chargeback, and then when you've got that, take the company to small claims court. The chargeback may bring you extra weight (or not, IANAL).

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

#83

Post by endianswap »

trimbo wrote: post #73

So basically this is the Columbia House[1] of shoes. That's not a scam, it's "a catch". When a consumer hears the pitch -- in the case of Columbia House, it was "get 8 CDs for 1 penny", in the case of JustFab it's "get any pair of shoes for $39" -- they should be asking what the catch is. An ungodly number of businesses involve catches to survive. How about cell phones? That new iPhone is only $200... but you have a…

The difference, at least from my point of view, is that it is a realistic deal to find a pair of shoes for $39 dollars when I don't think it's reasonable to be able to buy X cds for a penny, for even X=1. The closer you get to the actual or expected value of what you're buying, the more unethical I feel it is, just because you're going to be tricking a greater number of people.

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

#84

Post by tisme »

niggler wrote: post #67
tisme wrote: post #63

Earlier quoted context omitted.

That's nonsense. The only time a chargeback makes sense is after the payment has already gone through.

What the parent meant was "after you paid the bill". It's hard to go back later and say the charge was fraudulent after you received the bill and opted to pay it. In theory, payment = acceptance of charges.

Theory doesn't matter much here. Especially not with automated debiting of checking accounts to pay the balance or some amount of interest or a combination of those.

As a customer of the card company you have the right to dispute charges as far back as you want, whether they'll honor that or not is a different question but typically up to 6 months in a card-not-present situation should give you no problem at all. And once the complaints about this company start rolling in it will get even easier.

Mass chargebacks are a very powerful weapon in the hands of organized consumers.

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

#85

Post by Osiris »

From reading the sign-up page, it sounds like each month you are billed you receive a 'credit' that can be used to purchase an item from the site.

To me, the responsible thing to do would send an email to customers that have been billed for the month but have no yet redeemed their credit near the end of the month. Let them know they have a credit and suggest some items that they could purchase with the credit.

At least that would give information to the customer so they are more aware of what's going on sooner rather than later and people may feel less that they are being 'scammed' because the site was actually trying to help them get what they are paying for.

However, I agree that the signup page should make it more clear that it's a recurring charge. In fact, I would support a rule/regulation that required a user check a box that specifically states, "I understand that I am agreeing to a recurring monthly charge of $xx.xx".

I know that I'd be pretty pissed if I saw a recurring charge show up that I wasn't expecting.

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

#86

Post by PeterisP »

lopatin wrote: post #54
tehwebguy wrote: post #31

Earlier quoted context omitted.

I cannot stress this enough. If the company continues to receive chargebacks claiming fraudulent charges (which this really does appear to be) they will find themselves in a difficult place with card processors. Some processors drop clients if they crack 0.5% a chargeback rate.

I have no idea how complicated this is, but with 76 million in funding, what are the chances they found a way to process credit cards them selves?

It's not nearly enough. Some major conglomerates (If I recall correctly then GE, GM, Samsung and others) do stuff like that in-house by creating bank-subsidiaries in their largest markets, but I'd guess that it would be reasonable at 78 billion revenue, not 78 million.

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

#87

Post by simias »

nsns wrote: post #52
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…

I agree it's unethical. This is a commercial site, it tries to offer goods in exchange for money, anything that costs money should be emphasized and explained. How would they feel if someone managed to take some of their merchandise by stealth? I don't think this is some grey area: if you tricked me into paying a sum I never chose to pay, you're stealing money off my pocket.

That reminds me of certain ads I sometimes see on the french TV for ringtones or silly phone games: if you read the small print you realize they actually offer a membership, not a product, and you actually pay something like 3 euros a week instead of a one-time fee. They call that "clubs" or something.

Those ads usually seem to target teenagers (they're mostly on music channels or channels aimed at kids) who probably aren't in charge of the bill and if they're not careful they might end up with a bad surprise. This is beyond shoddy.

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

#88

Post by mseebach »

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'…

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.

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

#90

Post by mrkmcknz »

So I had some pretty angry thoughts after hearing this. I mean this is seriously unethical and immoral and I'll be extremely surprised if this approach stays after what seems to be an increasing amount of public pressure.

The fact some well known VC's pile a ton of money into this does not surprise me one bit. The company is making money and to be fair they do explain it pretty clearly IF YOU GO LOOKING. What they're doing isn't illegal. However, more should and could be done online to protect people from bad practices such as these.

CC companies do offer a form of protection through chargebacks, and over here in the UK whenever I have needed to dispute a transaction the mere mention of 'chargeback' usually kicks the retailer into shape.

One company I have HUGE respect for is TeamTreehouse, I mean look how they manage a subscription service[1]. Best practice indeed.

[1] http://cl.ly/image/0u0B1t313e3P

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