Two related companies that offer to finance the purchase of PCs to consumers with poor credit ratings have agreed to pay as much as $5 million to settle a U.S. Federal Trade Commission complaint that they violated a federal lending law and sometimes failed to deliver the computers, the FTC said.

BlueHippo Funding and BlueHippo Capital failed in many cases to tell consumers that they could not get refund even if they canceled orders before delivery of computers, the FTC said in a news release Monday. Many consumers paid hundreds of dollars and received nothing in return, an FTC complaint alleged.

A settlement before the U.S. District Court for the Southern District of New York includes a fine of at least $3.5 million and up to $5 million, which will be used to repay customers who entered into contracts with BlueHippo before March 2006 and did not receive products or a refund.

The two companies offered to extend credit to consumers to finance purchases of personal computers and other consumer electronics with down payments of $99 to $124, plus a year of weekly or biweekly payments ranging from $36 to $88. The companies, in television and radio commercials, said consumers with "less than perfect credit, bad credit, no credit" could finance computers.

The companies required consumers to agree to a series of automatic debits from their bank accounts, the FTC said. In many cases, the defendants debited consumers' accounts without first telling them they could not get a refund even if they canceled their orders, and regardless of the reason for cancellation, the FTC said.

A BlueHippo spokesman didn't immediately return a phone call seeking comment on the settlement. BlueHippo, based in Baltimore, sells desktops and laptops from Hewlett-Packard, Lenovo and Apple, monitors, plasma television sets, and long-distance calling cards.

Many consumers did not receive the merchandise they ordered or refunds, the FTC complained. BlueHippo failed to clearly and conspicuously disclose their policy of not providing refunds before debiting accounts, in violation of federal law, and consumers had no opportunity to make an informed decision about whether to risk the loss of advance payments, the FTC said. The defendants also allegedly failed to deliver the products after consumers made 13 weeks of payments, as promised during the sales call, in violation of the FTC Act, the FTC said.

The IDG News Service is a Network World affiliate.