Pinnacle Security Group, which was accused of using deceptive door-to-door tactics to convince consumers to sign up for its products even though they had existing contracts with other companies, has agreed to change its practices and pay restitution to its New York clients along with a $150,000 penalty to the state.
The settlement between Pinnacle Security Group and New York Attorney General Andrew Cuomo is the result of a two-year investigation that concluded more than 4,000 homeowners in the state had been duped. To induce people to sign up for its services, Pinnacle employees misled them into believing that their current security provider had gone out of business, had merged with Pinnacle, or was in some way already affiliated with Pinnacle, according to the complaint.
It's another in a long string of run-ins on consumer issues for Utah-based Pinnacle. The Better Business Bureau has closed 1,259 complaints against the company in the past three years -- more than half of those in the past year -- and gives the company its lowest rating: F.
Utah settled a similar case against Pinnacle in November. Illinois Attorney General Lisa Madigan also sued Pinnacle over deceptive marketing tactics, including telling consumers it had strategic partnerships with its competitors including ADT as a tactic for getting their customers' business. That case settled earlier this year.
According to New York officials, as a result of the deception, consumers were stuck paying for redundant services from two security companies, including more than $50 a month for Pinnacle. Some who tried to void the contract were faced with stiff cancellation fees of up to $1,900, equaling the payment for the entire 39-month contract.
"Pinnacle used dirty tricks and deception to pressure New Yorkers who were simply trying to ensure the security of their homes," Cuomo said in a statement. "This settlement holds Pinnacle accountable for their actions and makes fundamental reforms to the company to prevent such fraud from happening again."
To make the bogus door-to-door solicitations, the firm hired short-term sales representatives who were poorly trained and monitored, the investigation alleges. In one instance, a representative altered a contract after it was signed to make it appear that the consumer had authorized the company to automatically debit monthly payments from his or her bank account. The incentive to falsify these authorizations was that employees' commissions were reduced if consumers did not agree to automated payments.
In addition to the restitution and civil penalty, Pinnacle has agreed to put in place improved procedures to oversee its sales force, and to provide clear disclosures to consumers about the terms of their contracts.
The company could not be reached for comment.
Take the first steps to building your portfolio.View Course »