Online postage service Stamps.com has agreed to settle a consumer lawsuit brought by both the Santa Clara County and Santa Cruz County district attorney’s offices for claims of false and misleading advertising.
Stamps.com will pay $4 million in the settlement, which includes $2.5 million in penalties and costs and $1.5 million in restitution for victims, according to prosecutors.
The company, based in El Segundo in Southern California, charges customers a monthly service fee to purchase stamps online and print the stamps from their home computers.
A joint investigation by the two district attorney’s offices alleged the company offered a no-risk trial without “clearly and conspicuously” disclosing that at the trial’s end, customers would be automatically enrolled in their fee-based monthly service, prosecutors said.
California law requires that such disclosures are clear and conspicuous so that consumers are informed of all the terms and conditions before they agree, according to prosecutors.
“The law seeks to make sure consumers are protected and avoid hidden costs of an automatic enrollment or subscription service,” Santa Clara County Deputy District Attorney Francisca Allen said.
“Sometimes such services are difficult to get out of. Sometimes people don’t even notice they are paying for the service at all,” Allen said.
Stamps.com has cooperated in the investigation and made efforts to resolve the issue, including changing its website so that the details of its trial period are prominent and easy to understand, prosecutors said.