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Texas Attorney General Greg Abbott today charged a finance company with violating the Texas Deceptive Practices Act by failing to deliver computers and related equipment to purchasers.

The customers, who were primarily people with poor credit ratings, had agreed to purchase computers through “Blue Hippo,” a company that advertises heavily on television, offering computers on payment terms.

According to the legal action taken by the state, Blue Hippo Funding, LLC and its sole shareholder Joseph K. Rensin of Maryland never registered to conduct business in Texas. Despite that, the company’s advertising, targeted Texans with poor credit who wanted computers, but whose limited financial resources led them to use the defendants’ “law-away plan.”

Other defendants named are Blue Hippo Capital, LLC of Virginia and Nevada.

In addition to today’s state enforcement action, which was filed in Travis County District Court, the Texas Attorney General’s Office is working closely with the Chapter 7 liquidating trustee that was recently appointed in the defendants’ Delaware bankruptcy case. By pursuing recoveries in state and federal courts, Texas is working to improve the likelihood that consumers’ restitution claims will be fulfilled.

Blue Hippo advertised a toll-free number and website where customers seeking to purchase a computer would be guaranteed financing, regardless of credit. Potential customers were told that they would be required to make a certain number of layaway payments and those payments would purportedly secure the buyer’s right to purchase their computers. Blue Hippo would then finance the remaining balance.

“According to customer complaints received by the Office of the Attorney General, the company failed to ship computers as they were contractually obligated to do, even though customers made the required number of consecutive layaway payments,” the AG’s Office said in announcing the legal action. “Complaints also indicate the defendants failed to ship, as promised, certain ‘free’ products, such as printers, software and televisions.”

Some customers repeatedly contacted the defendants by phone about Blue Hippo’s failure to deliver the partially purchased products. As a result, customers became frustrated, canceled their orders and requested that the defendants fully refund them. Instead of refunding customers’ installment payments, however, Blue Hippo referred customers to a clause in the layaway plan stating that cancellations would merely receive a “store credit.”

“After tiring of the defendants’ duplicity, customers grew so frustrated that they notified their banks to stop Blue Hippo’s automatic debit withdrawals from their checking accounts. However, Blue Hippo claimed that customers who stopped automatic withdrawals were subject to ‘default’ provisions in the ‘retail installment contract,’ which the defendants claimed allowed Blue Hippo to increase interest rates to 24 percent, or the highest interest rate allowable by law,” the AG’s Office noted. “Worse, the company maintained that the contract permitted it to continue withdrawing payments from customers’ accounts. As a result, the defendants essentially used the customers’ stop payment instructions as an excuse to increase interest rates and therefore simply ignored customers’ clear instructions to the contrary.”

The attorney general is seeking penalties against Blue Hippo of up to $20,000 per violation of the Texas Deceptive Trade Practices Act, as well as restitution to customers were financially harmed.

In early December, Blue Hippo filed for Chapter 7 bankruptcy after having their funds frozen by a payment processor. A Delaware bankruptcy judge denied the company’s petition to release the funding.

The company had an extensive history of consumer complaints, including being the subject of a Better Business Bureau “consumer alert” within eight months of its founding. It was also investigated on a number of occasions for consumer fraud.

As of August 2009, the Better Business Bureau had logged a total of 3950 consumer complaints against Blue Hippo from across the nation.

“Due to this pattern of complaints and Blue Hippo’s failure to correct the underlying causes for the complaints, the company is rated ‘unsatisfactory,’” the BBB said in a statement issued at that time.

According to records on file with the FTC, the company was repeatedly fined over consumer fraud complaints and failure to file FTC monitoring documents. At one point, Blue Hippo was ordered to reimburse $5 million to defrauded customers.

In November, the FTC asked a federal judge to issue a contempt order against Blue Hippo.

The Texas AG’s Office joined a host of attorneys general across the nation that have taken action against the company. Some of the states that have taken action against the company include Florida, Maryland, Tennessee and West Virginia.

InstantNewsKaty was unable to reach anyone associated with Blue Hippo for comment.