Goal setting digital health business Pact reaches $1.5M settlement with FTC

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Pact, a Seattle-based digital health startup that allegedly bilked customers who used its app to set weekly tasks to improve their health or face automatic charges when they missed an activity, has agreed to pay $1.5 million in a settlement with the Federal Trade Commission. The settlement stems from allegations that the company charged users even when they successfully completed the tasks and failed to pay those customers rewards.

Consumers who used the Pact app made “pacts” to exercise a certain number of times per week or meet dietary goals, and agreed to be automatically charged an amount, ranging from $5 to $50 per missed activity if they did not complete their pacts.

The FTC complaint noted that defendants received tens of thousands of consumer complaints about unauthorized charges billed through the Pact app, with many consumers reporting hundreds of dollars of losses in such charges. Although the complaint said the defendants acknowledged that they knew about unauthorized charges, they kept charging consumers who completed their pacts. They even billed consumers who attempted to cancel the service.

“Consumers who used this app expected the defendants to pay them rewards when they achieved their health-related goals, and to charge them only when they did not,” said Tom Pahl, Acting Director of the Bureau of Consumer Protection in a news release. “Unfortunately, even when consumers held up their end of the deal, Pact failed to make good on its promises.”

The regulator charged the principals of the company, CEO Yifan Zhang and Geoffrey Oberhofer, the cofounder and chief product officer, prohibition against unfair and deceptive practices and the Restore Online Shoppers’ Confidence Act.

Of the $1.5 million in the settlement, $940,000 will be used to compensate consumers. The FTC has given Pact defendents 30 days to make good on the settlement.