LivingSocial to Pay $4.5 Million Settlement for Violating Consumer Protection Laws

Daily deal site LivingSocial has agreed to pay $4.5 million to settle a class action lawsuit accusing the company of violating consumer protection laws by issuing gift certificates with unlawfully short expiration dates. According to court documents filed October 19, 2012 in the District of Columbia federal court, LivingSocial has agreed to establish a settlement fund to pay out claims, as well as “revise several portions of its business practices.” The proposed settlement would end the legal battle between LivingSocial and plaintiffs who claimed they were unable to redeem expired vouchers.

There are typically two expirations dates for daily deal programs:  one for the “paid value” of the deal and one for the “promotional value” of the deal.  The paid value is the monetary amount the consumer spent on the deal; the promotional value is the discounted deal that the consumer receives.  The promotional value tends to expire much sooner than the paid value. The lawsuit asserted that the sale of online prepaid discounted coupons with short-term expiration dates is illegal under the federal Credit Card Accountability Responsibility and Disclosure Act, and other state laws.

The preliminary settlement forces LivingSocial to change its terms and conditions for daily deals “so that the expiration dates on its vouchers and Web site are more clear and understandable to consumers.”

This means that LivingSocial is required to:

1. Spell out a deal’s paid and promotional value
2. Explain how expiration dates work
3. Offer a refund for unredeemed vouchers within seven days of purchase
4. Set the expiration date of a deal’s paid value to at least five years

Once the settlement is approved, LivingSocial users with lapsed coupons can submit claims to a portion of the $4.5 million, or up to 100 percent of the paid value “of any LivingSocial deals that is unredeemed and unrefunded and whose promotional value has expired.”

If you feel you have been the victim of consumer protection laws, please contact Khorrami, LLP for a private consultation.

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