Third-Party Energy Supplier Enters into $1.36 Million Settlement with the State to Resolve Allegations It Preyed on Consumers During the Harsh Winter of 2014
Energy Supplier Enters into $1.36 Million Settlement with the State to Resolve Allegations It Preyed on Consumers During the Harsh Winter of 2014
Third-party energy supplier IDT Energy, Inc. (“IDT Energy”) has agreed to pay $1.36 million, including $1.2 million in restitution to consumers, and has agreed to significantly revise its business practices in order to resolve the State’s allegations that it engaged in unfair and deceptive business practices that saddled consumers with sky-high energy bills during the harsh winter of 2014.
The agreement between the Division of Consumer Affairs and the New Jersey Board of Public Utilities (collectively “the State”) and IDT Energy resolves the State’s allegations that during an unusually cold period that caused energy prices to spike in early 2014, IDT Energy engaged in aggressive and deceptive marketing and sales tactics; switched consumers’ energy suppliers without their authorization; misled consumers with promises of lower energy rates; failed to provide consumers with energy rates that were consistent with the pricing mechanisms in the IDT Energy contracts; and utilized contracts that included provisions that were contrary to clearly established legal rights of consumers or to the responsibilities of IDT Energy under state and federal law.
“New Jersey will not tolerate this kind of predatory behavior in the marketplace,” said Attorney General Gurbir S. Grewal. “This settlement holds IDT Energy accountable for the financial losses suffered by consumers as a result of its alleged actions and requires IDT Energy to revise its business practices to ensure that consumers are provided with accurate disclosures as to pricing.”
The allegations against IDT Energy stem from an investigation the State opened in response to numerous consumer complaints concerning IDT Energy’s business and marketing practices, including allegations of excessive energy supply prices during the “Polar Vortex” of 2014, an extremely cold period between January 1 and March 31 of that year.
The investigation sought to ascertain whether IDT Energy’s conduct in marketing and selling alternative energy supply services in New Jersey violated the Electric Discount and Energy Competition Act, the Consumer Fraud Act, the Plain Language Review Act, the Truth-in-Consumer Contract, Notice and Warranty Act, and related regulations.
“The Division of Consumer Affairs, in cooperation with the BPU, took decisive action in response to consumer complaints about IDT Energy’s alleged aggressive sales tactics and false promises,” said Paul. R. Rodríguez, Acting Director of the Division of Consumer Affairs. “Beyond this settlement, we will continue to monitor third-party energy suppliers to ensure compliance with the laws in place to protect consumers from deceptive marketing practices.”
“We are pleased to work with the Division of Consumer Affairs to take action against IDT Energy,” said BPU President Joseph L. Fiordaliso. “I hope this sends a message to IDT and other energy suppliers that they cannot take advantage of consumers, particularly during the cold winter months when they are their most vulnerable, without consequence.”
Under the terms of the settlement, IDT Energy has paid the State $1,364,497, of which $1,225,722 represents consumer restitution, $100.000 represents civil penalties, and $38,775 represents reimbursement of the State’s attorneys’ fees and investigative costs. In addition, IDT Energy will pay Rust Consulting, Inc. to distribute the restitution to IDT Energy customers during the Polar Vortex by the end of the summer.
Further, IDT Energy has agreed to make significant changes to its business practices which includes
▪ Revising its website brochures, and/or contracts to: ensure that consumers are provided with clear and conspicuous information about IDT Energy’s fixed and variable prices for gas and electric, including: the precise mechanism or formula by which monthly variable prices will be determined; a detailed customer bill comparison that identifies the price that IDT Energy billed consumers each month during the previous year versus the Local Distribution Company’s (“LDC”) price; a clear and concise statement that the prices depicted reflect past performance and do not indicate future pricing and/or savings; and a statement clearly informing consumers that switching to a third-party energy supplier is not mandatory and that consumers can opt to stay with their current provider of gas and electric.
▪ Revising its sales practices, among other things, to: prohibit sales representatives from switching consumers from their current energy providers to IDT Energy without the account holder’s authorization; prohibit sales representatives from making false statements or promises regarding potential savings; prohibit sales representatives from attempting to obtain access to a consumer’s LDC bill under false pretenses; prohibit sales representatives from intimidating or unduly pressuring consumers and/or senior citizens into switching to IDT Energy; and ensuring that only authorized account holders approve the switch of gas and/or electric service to IDT Energy.
▪ Revising customer service, among other things, by: undertaking good faith efforts to resolve consumer complaints promptly; notifying complainants that if they are dissatisfied with IDT Energy’s response, they can contact the BPU to request an alternate dispute resolution procedure or to file a formal complaint; and having a customer service representative available to BPU staff and/or customers within 24 hours, if necessary to resolve a problem.
▪ Auditing and monitoring sales practices by: developing revised training materials and procedures to ensure that its customer service representatives, regulatory affairs representatives and sales representatives, whether employees of IDT Energy or third-party vendors, are familiar with IDT Energy’s sales policies and the terms of the settlement; recording all telephone solicitations between its sales representatives and consumers and maintaining all recordings that result in an enrollment, for two years; if a consumer complaint concerning deceptive or improper sales practices is substantiated, further investigating the six month period prior to the date of the complaint to determine whether additional consumers enrolled by the same sales representative were subjected to any such practices; once a month, for a one year period, randomly selecting telephone solicitations that resulted in an enrollment and reviewing them for compliance with IDT Energy’s sales and marking policies and the settlement terms; once a month, for a one year period, randomly selecting consumers who were signed up with IDT Energy during a door-to-door solicitation and attempting to confirm through three telephone calls or three emails that the sales representative complied with IDT Energy’s sales and marketing policies and the settlement terms; and making sales commissions earned by sales representatives and third-party vendors subject to forfeiture if IDT Energy determines that consumers were subjected to deceptive or improper sales practices.
▪ Employing a Full-time Compliance Officer whose duties will include: developing policies and procedures to ensure that sales representatives and customer service representatives comply with the settlement terms as well as all applicable laws; developing and implementing training materials and training programs; ensuring that all required personnel receive the necessary training; overseeing the random audits of telephone solicitations and door-to-door solicitations; and overseeing the investigation of all consumer complaints of deceptive or improper sales tactics and taking appropriate remedial action.
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