Online retailer fined $1.8M for misleading consumers on monthly fees

SANTA CRUZ, Calif. -- An online clothing retailer today agreed to pay prosecutors in Santa Clara and Santa Cruz counties $1.8 million to settle a suit over misleading customers about automatic monthly payments charged to their credit cards, according to a spokeswoman.

The settlement between the two counties and JustFabulous Inc., the El Segundo-based owner of four popular personal shopper websites, was finalized today, Santa Clara County Deputy District Attorney Francisca Allen said.

Allen, who works for the district attorney's consumer protection unit in San Jose, said prosecutors investigated complaints about JustFabulous Inc. and found the firm's websites did not comply with California consumer laws on reporting subscription fees to customers.

The company's sites JustFab.com, Fabkids.com, Shoedazzle.com and Fabletics.com, advertised clothing, shoes and accessories at regular and deeply discounted prices, according to Allen.

If the consumer clicked on the low price, they would receive the item but also be charged a $39.95 monthly subscription fee on their credit cards, Allen said.

The fees could be used as credit toward online purchases but some consumers were unaware of the monthly charges and JustFabulous only permitted customers to cancel them between the first and fifth day of the month or else be charged for that month, according to Allen.

Under California consumer protection laws, an explanation about subscription service fees like those used by JustFabulous must be posted on websites "clearly and conspicuously," usually with a bold and colorful font easily seen next to the discounted product offer, Allen said.

JustFabulous had failed to do that and instead buried it in fine print, so some people did not know about the charges, Allen said.

In its settlement agreement with the two counties, JustFabulous will pay $1,875,000 in penalties and costs - funds to be split between the Santa Clara and Santa Cruz D.A. offices to pay for future consumer protection investigations - and bring their websites into compliance by Nov. 10, Allen said.

Consumers residing in California who believe they were misled by JustFabulous will be able to join a pending class action lawsuit against the company and file claims for reimbursement, according to Allen.

Prosecutors do not know how many consumers may have been misled by JustFabulous about the subscription continuity agreement or how much money they may have lost to the company in charges to their credit cards, Allen said.