YP.com Barred from Activation Checks in $2M Settlement

Yellow Pages Web site YP.com will pay more than $2 million in restitution to 33 states to settle charges that it deceptively marketed online advertising packages, California attorney general Bill Lockyer announced last week.

According to Lockyer’s office, YP.com marketed its Internet ad packages via direct mail using “activation checks” that ranged from $3.25 to $3.50. By depositing the checks, recipients activated accounts and agreed to pay monthly fees for the listing services, a statement from Lockyer’s office said.

The activation checks included a statement above the endorsement line informing prospects that by depositing the check, they agreed to pay monthly advertising fees, which would be collected automatically through the customer’s bank account or phone bill.

Despite the disclosure, “some businesses and some nonprofit organizations, including churches … were unaware or remain unaware that they deposited an ‘activation check’ which resulted in an obligation towards YP, (or) were unaware that there was automatic withdrawal from the checking account for YP services,” Lockyer’s office said. Also, some businesses and nonprofits mistakenly deposited the checks, or did not notice the disclosure statement above the endorsement line, the attorney general’s office said.

Lockyer’s office contends that YP.com’s activation checks constituted unfair businesses practices and false or misleading advertising.

In California, more than 65,500 businesses and nonprofits have received and deposited the activation checks since January 1, 2003, the attorney general’s statement said. Under the settlement, California will receive $200,996 to give restitution to former YP.com customers who deposited the checks, plus $75,000 to cover the state’s investigation costs, according to Lockyer.

Former customers will have six months to file claims for restitution. Each former customer may receive restitution for up to four months of fees, which ranged from $24 to $29 per month, Lockyer’s office said. The attorney general said he will use any money remaining from the $200,996 in restitution to fund other consumer protection cases.

The settlement also requires YP.com to notify current customers that they have an opportunity to cancel and that they are eligible to receive a two-month refund, the statement said. Any refunds to current customers will be paid separately from the $2 million, according to Lockyer.