NY AG and FTC Secure $1.6M from Online Apartment Finder for Allegedly Defrauding Renters
On August 28, 2023, the New York Attorney General and the Federal Trade Commission (FTC) announced that they have secured $1.6 million from Roomster, an online apartment search platform, and its owners, for allegedly defrauding millions of renters nationwide by posting unverified apartment listings and fake reviews.
The consent order also prohibits Roomster and its executives from buying and posting fake reviews about their listings to lure customers.
Roomster, a Manhattan-based company, allegedly failed to verify apartments submitted to its website, posted non-existent apartment listings and scammed consumers with fake positive reviews that it bought and posted online. The NY AG and the FTC co-led a coalition of six attorneys general to stop Roomster’s alleged deceptive practices and secure restitution for impacted individuals nationwide.
“Amid a housing crisis, Roomster deceived and misled hundreds of students, young adults, and low-income renters for its own benefit,” said NY Attorney General lawyer James. “Today’s consent order blocks Roomster from posting any more fake reviews on unverified listings and prevents the company from harming renters trying to find a home in New York. Looking for an apartment can be stressful, and the last thing renters need is to be scammed by fake reviews and apartments that might not even exist. I thank the FTC for their partnership to protect renters nationwide.”
In August 2022, Attorney General James and the FTC filed a lawsuit against Roomster for allegedly misleading consumers by posting fake reviews that were purchased through marketers, posting non-existent apartment listings, and failing to verify apartments listed on their website. An investigation purportedly found that Roomster did not actually verify listings posted on its platform by users or ensure that they were real or authentic.
According to the AG’s announcement, undercover investigators were easily able to post a listing with a U.S. Postal Office commercial facility address on the platform. The listing purportedly provided by the undercover investigators allegedly had fake rental specifications and remained on the platform for several months. At no point did Roomster contact the undercover investigators to verify the address, the specifics of the apartment, the legitimacy of the email, or other personal information of the lister, according to the New York AG and FTC.
To lend credibility to its unverified listings, Roomster’s executives allegedly saturated the internet with tens of thousands of fake 4- and 5-star reviews. Roomster’s CEO and Chief Technology Officer allegedly bought more than 20,000 fake reviews from a third party to increase traffic to their platform. According to the NY AG and FTC, that third party used more than 2,500 fake iTunes accounts, as well as fake Gmail accounts, to push out fake reviews on Roomster’s apps. Before becoming aware of the investigation, according to the NY AG and FTC, his website stated, “Buy app reviews & boost your app ranking.”
The FTC recently updated its Endorsement Guides and FAQ guidance, while proposing a rule that will impact influencer marketing and digital advertising practices.
The lawsuit alleged that Roomster’s executives were deliberate about how to post the fake reviews to appear real and increase the chances of them being published on app stores. They allegedly called this scheme a “drip campaign.” The aforementionted third party purportedly told Roomster’s executives that fake reviews had to be “dripped” at a “slower pace” in order to “stick.”
Allegations also included that the third party was instructed to spread out the reviews to be “constant and random” to increase their chances of getting posted on the app stores. On multiple occasions, the agencies allege, Roomster’s executives directed the third party to post a random amount of reviews in several countries, specifying in their orders how many reviews should go to each country.
Some examples of the fake 5-star reviews that Roomster allegedly purchased from the third party and published include:
- Wonderful!
Roomster is better then [sic] others. Very easy to use. Tons of listing. No scammers, all users are real. Easy to communicate with owners. In a single word FANTASTIC!
like! - Roomster is great!
Especially for low-income people who need rented accom[m]odation or those students who need to rent a room because [i]t provides the service with a reasonable price range period. - The sheer volume of positive fake reviews diluted 1-star reviews from real users, such as:
- Full of scammers
I highly highly suggest that you do not use this site! Because you will get scammed. This app is loaded with people trying to scam you! Out of every 10 post 8 [sic] are scammers DO NOT USE THIS APP!! - Scam
This app is garbage. I had higher hopes but it completely let me down. Every profile on here seems to be a fake profile and every message I got from people said almost exactly the same thing. Not worth it. - Don’t waste your time
I couldn’t give it zero. It won’t let me view things so I got a 7 day subscription. Reached out to 38 listers. Got response from only 1 legitimate lister. The rest was all scam and 5 days of headache. Steer clear. They don’t vet
The consent order includes a monetary judgment of $36.2 million and civil penalties totaling $10.9 million payable to the states. These amounts will be suspended after Roomster and its owners pay $1.6 million to the six states based upon the defendants’ inability to pay the full amount. If Roomster and its owners are found to have misrepresented their financial status or to have violated the terms of the order, the full amounts would immediately become due.
The order also requires Roomster to ensure that its listings are verified and authentic and to monitor its affiliate marketers. This includes routinely reviewing their marketing materials without notice; investigating consumer complaints about affiliates; providing refunds to consumers who were impacted by affiliate conduct that violated the order; and halting payments and terminating affiliates who pose as consumers or misrepresent their status in other ways.
Joining the NY Attorney General and the FTC in the lawsuit were the attorneys general of California, Colorado, Florida, Illinois and Maryland.
Richard B. Newman is an FTC advertising compliance lawyer at Hinch Newman LLP. Follow FTC defense lawyer on National Law Review.
Informational purposes only. Not legal advice. May be considered attorney advertising.
