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Post date: June 26 2003

Online Retailer Must Pay Overdue Rebates To Consumers

Attorney General Spitzer today announced the filing of a consent decree in U.S. District Court in Brooklyn that requires UrbanQ, an online retailer of apparel and other commercial and household products, to pay more than 1,000 consumers $600,000 in rebates.

The company, located in Cedarhurst, has sold approximately $5 million of products since it began operating in 2000. Its business model, since altered, was to sell products (often retired or odd lot items) at inflated prices while offering unusually generous rebates, called "Qbates," which often amounted to 100% of the purchase price. Among the hundreds of items UrbanQ offered were Calvin Klein jeans, listed at $229.99, FUBU tank tops at $34.99, Reebok backpacks at $59.99, Ralph Lauren vests at $119.99, DKNY baby-Ts at $59.99, Barbie duffle bags at $59.99, and Blues Clues bathing suits at $59.99 – all either "free after rebate," or discounted by over 90%.

The rebates, offered directly by UrbanQ, rather than a manufacturer, were supposed to be paid within 12 weeks after consumers submitted the required "Qbate" forms, but in many cases have remained outstanding for much longer periods of time.

"This settlement with UrbanQ is a victory for consumers who have been waiting for these rebates for months or years," Spitzer said. "It is unfortunate that consumers were used by the company as a source of short-term capital, and exposed to an unfairly high financial risk."

Through October 2001, the company paid over $2 million in rebates. However, by early 2002, the Attorney General's Office received over 200 complaints that UrbanQ had not honored rebates for products purchased and delivered months earlier. At present 240 consumers had filed complaints with Spitzer's office about UrbanQ's rebate practices. All will be entitled to relief if the consent decree is approved.

The Attorney General's pleadings, filed on consent with defendants and submitted jointly with the Federal Trade Commission, alleges that UrbanQ's practices were deceptive and misleading.

The consent decree also names as parties the company's officers and principals, Daniel Greenberg, Michael Konig, and Steven Krausman. The settlement requires the defendants to post a $500,000 bond prior to offering any rebates; keep and retain records involving rebates for a six-year period; abide by fair and non-misleading rebate practices; and submit to monitoring by the Attorney General and FTC.

"In the wrong hands, online commerce runs the risk of putting greater transactional risks on consumers than are expected," said Spitzer. "That is what those at the helm of UrbanQ tried to do. But my office will continue to ensure that the risks borne from loss, fraud, or poor business judgment remain with business, which has the means and incentive to prevent it, rather than with any individual consumer."

The case was handled by Ken Dreifach, Chief of the Attorney General's Internet Bureau, working with Ronald Waldman, of the FTC's New York regional office.