Wednesday, July 11, 2007

Dating Service Franchisor, New York Franchisees Settle Charges of Overcharging Customers

Nationwide dating service It’s Just Lunch International and three of its New York franchisees have settled an action brought by the New York Attorney General for charging customers more for social referral services than allowed by state law.

The franchisor and its franchisees will pay fines and costs to the state and reform their business practices to conform fees to within the statutory maximum of $1,000 and to offer contracts that fairly spell out consumers’ rights under New York law.

New York General Business Law §394-C provides that “social referral service contracts”: (1) may not require the payment of an amount greater than $1,000, (2) may not extend over a period of time greater than two years, (3) may not require the purchase of ancillary services as a condition of the contract, (4) must require a minimum number of referrals per month (if the contract charges more than $25), (5) must allow a customer to place a membership on hold for a period up to one year, and (6) must provide a three-business-day right to cancel a contract without a fee.

Many of the customers of It’s Just Lunch paid $1,500 for two six-month contracts that were signed at the same time. This practice was merely a device for circumventing state law limitation on fees of $1,000, according to the New York Attorney General.

The company’s contracts also violated state law by prohibiting consumers from filing lawsuits against the company and by failing to include many consumer-friendly provisions, such as a guarantee of a specific number of social referrals per month, the suit alleged.

The franchisees—located in New York City, Albany, and Williamsville—agreed to stop charging customers more than the $1,000 statutory limit, to bring their contracts into full compliance with the state law, to provide three free referrals to customers who paid more than $1,000 and signed contracts on or after January 1, 2006, and to pay a $6,000 fine and $1,000 in costs each.

Pursuant to the settlement, the franchisor paid a $45,000 fine and $2,000 in costs to the state and agreed to implement policies and procedures to ensure that future New York franchisees understand their obligations under the state law.

The settlement was announced in a July 6 press release issued by the New York Attorney General.

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