June 12, 2006 at 5:19 PM ET
In January, we told you about a cascade of complaints against a Web site that lured consumers with the promise of a free cell phone -- and then allegedly held their rebates hostage.
Now that company -- InPhonic Inc. -- has been sued by the Washington, D.C., Attorney General's Office for those very practices. The company is one of the "most complained about" firms in America, according to the Washington, D.C., Better Business Bureau.
Doing business as the Web site Wirefly.com and a host of other brands, Washington D.C.-based InPhonic Inc. published aggressive advertisements promising free cell phones from major brands, including Verizon Wireless, Cingular Wireless, Sprint, and T-Mobile. The company says it sold nearly 1 million cell phones last year, making it perhaps the largest independent Internet cell phone retailer. The rebates in question were sizable, often $150 or more.
But last year, consumers began pelting the D.C. Better Business Bureau with complaints that the rebate procedures were so cumbersome as to be nearly impossible. Consumers were forced to wait 180 days to file for their rebates, but had to file before 210 days passed, giving them a tiny window of opportunity to get their funds. When the story was told on the Red Tape Chronicles, many consumers wrote to say they'd fulfilled the tedious requirements, but still had not received their rebates.
Washington, D.C., prosecutors apparently heard the same complaints. They filed a consumer protection lawsuit in the district's Superior Court on Thursday,
In a statement, the agency alleged that InPhonic "imposes restrictive conditions" on the rebates, and the firm is "unreasonable in its enforcement of the rebate terms," requiring a host of complicated paperwork and denying rebates for technical reasons.
“A company needs to let consumers know up-front about special conditions that make it difficult to obtain advertised savings or to avoid hidden charges," Attorney General Robert J. Spagnoletti said in a statement. "Consumers should be able to count on the bargains that companies offer them."
InPhonic denied the charges in a statement to the Washinton Post.
Consumers who complained to MSNBC.com said that Wirefly operators "talk in circles" when they called trying to get their rebates.
"They answer your questions with questions," said Marie Vento in January, when she was trying to track down $600 worth of rebates.
Back in January, there were more than 1,400 complaints filed against InPhonic at the D.C. Better Business Bureau. Now that number has climbed past 2,000. Ed Johnson, president of the bureau, said InPhonic was one of the "most complained about" companies in the bureau's nationwide complaints database. He said consumers should read InPhonic's story as a cautionary tale.
"In general, rebate offers are a mainstream marketing technique that can represent a real value to the consumer. What most consumers do not realize is that unless the rebate is provided at the point of sale, it is only a potential rebate," he said. "If you are required to follow a course of action in order to obtain the rebate and the process has restrictive or complicated rules, the likelihood of getting the discount is greatly diminished."
For a list of ways to track down wayward rebates of all kinds, see an earlier Red Tape Chronicles Entry, "13 Ways to Track Down Wayward Rebates."
The Washington D.C. lawsuit seeks restitution for consumers, a permanent injunction against the alleged unfair business practices, and civil penalties.