Attorney General Cuomo Reaches Agreement With Security Company That Tricked Homeowners Into Signing Contracts

NEW YORK, NY (August 12, 2010) - Attorney General Andrew Cuomo today announced a settlement with Pinnacle Security Group, LLC (“Pinnacle”), a Utah-based home security company that used deceptive door-to-door sales tactics to trick New York homeowners into signing contracts for unnecessary services. The settlement requires Pinnacle to pay restitution to New Yorkers, pay a $150,000 penalty, and reform its sales practices. Pinnacle has signed contracts with approximately 4,000 customers throughout New York since 2008.

Pinnacle’s home security contracts were for a term of 39 months and included monthly service fees, installation fees, activation fees, and equipment charges. The Attorney General’s investigation revealed that Pinnacle’s door-to-door sales staff often targeted homeowners who had existing contracts with other security companies. In a deceptive practice known as “slamming,” Pinnacle sales staff then made false representations to convince people to sign up for Pinnacle products even though the consumer had a contract with another home security company. Pinnacle misled homeowners into believing that their existing home security provider had gone out of business, had merged with Pinnacle, or was in some way already affiliated with Pinnacle.

As a result of this deception, unsuspecting homeowners signed up for a contract with Pinnacle when they were still bound by their prior home security contract. Homeowners were then stuck paying for redundant monthly services from two security companies, including upwards of $50 per month for Pinnacle. Consumers who tried to void the contract were often faced with substantial cancellation fees. For example, Pinnacle would demand full and immediate payment of the entire cost of their contract if consumers wanted to cancel early; these costs could amount to $1,900.

“Pinnacle used dirty tricks and deception to pressure New Yorkers who were simply trying to ensure the security of their homes,” said Attorney General Cuomo. “This settlement holds Pinnacle accountable for their actions and makes fundamental reforms to the company to prevent such fraud from happening again.”

The Attorney General’s investigation revealed that Pinnacle’s sales team:

  • Made phony telephone calls to homeowners to tell them that their existing home security contract had been canceled;
  • Misrepresented the actual terms and costs of their contracts;
  • Changed the terms of contracts after consumers had signed them.

In addition, Pinnacle failed to properly train and monitor its sales force, and failed to respond promptly and adequately to consumer complaints. The Attorney General’s investigation began when his office was contacted by a Pinnacle consumer.

The settlement with Pinnacle will provide full compensation to all New York consumers who signed up with the company since January 2008 and were subject to deceptive sales practices. All such consumers will have the option to cancel their contract with Pinnacle without incurring any early cancellation fees or other charges. Pinnacle must also pay $150,000 to New York State for penalties, costs, and fees. Further, the settlement requires Pinnacle to implement enhanced procedures to oversee its sales force and requires the company to provide clear disclosures to consumers about the terms of their contracts.

As a result of the settlement, Pinnacle must hire a third-party administrator to handle claims of restitution. This administrator is contacting New Yorkers who entered into a contract with Pinnacle after 2008 in order to inform them of their right to make a claim for restitution. New Yorkers who believe they may have been a victim of Pinnacle’s deceptive practices can also submit a claim for restitution by calling the Attorney General’s Consumer Helpline at 800-771-7755 or by visiting www.ag.ny.gov.

This matter was handled by Assistant Attorney General Matthew Eubank in the Attorney General’s Brooklyn Regional Office and by Consumer Frauds Bureau Deputy Chief Jeffrey K. Powell, with the assistance of Investigator Percy Corcoran, under the supervision of Assistant Attorney General-in-Charge of the Brooklyn Regional Office Lois Booker-Williams, Special Deputy Attorney General for Consumer Frauds & Protection Joy Feigenbaum, Deputy Attorney General for Economic Justice Michael Berlin, and Executive Deputy Attorney General for Economic Justice Maria Vullo.

The settlement with Pinnacle is available at www.ag.ny.gov.

 

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