Noom Inc, a subscription-based app that focuses on weight loss, agreed to a $62 million settlement, according to Reuters, in regards to its 2020 lawsuit.
The lawsuit states that Noom allegedly wronged its customers by locking them into a membership despite promoting a “risk-free” trial, charging subscribers up to nearly $200 without their consents.
Read on to learn more about the settlement, Noom’s founders’ response to their community, and how the company is taking steps toward improving its business transparency.
Noom’s Settlement Offer
Noom’s lawsuit settlement was filed on Feb. 11 and still requires court approval. The settlement requests that Noom pay $56 million in cash and offer $6 million of subscription credits to affected customers. The payouts are assumed to be between $30 and $167 per individual.
“We believe the proposed settlement provides excellent monetary and programmatic relief for Noom’s customers,” J. Burkett McInturff of Wittels McInturff Palikovic, the Plaintiffs’ Class Counsel, told SUBTA.
Noom’s leadership responded to the agreed-upon settlement shortly after.
“While we disagree with the claims made in the suit, we believe the settlement is the best path forward as it allows us to focus our energy on delivering the best possible health outcomes for our Noomers,” wrote Noom Co-Founders, Saeju Jeong and Artem Petakov.
The founders also explained that several improvements reflecting upon business transparency have been made within the company over the last 18 months, including:
- Easy cancellation via a self-service option on the app and website
- Addition of phone and chat-based customer service support
- Expansion of the support team
- Clearer subscription and pricing details
“These improvements not only directly enhance the Noom experience for our customers but also represent how seriously we take earning and maintaining your trust,” stated Jeong and Petakov. “We see this moment as an opportunity to deepen our commitment to acting upon our customer’s feedback, as well as improving upon and upholding our high standards.”
Noom’s Alleged Business Transparency Issues
The lawsuit filed against Noom in May 2020 accused the company of collecting up to six months of non-refundable payments from its customers.
Payments totaled as much as $199 for a multi-month plan once the trial period had expired. The situation reflected poorly on Noom and its lack of business transparency, as seen on its Better Business Bureau page, which has accumulated over 2,000 complaints:
- “I had Noom for a period of time. After my trial I put down I wanted to have money taken out monthly but was charged $179 with no notice or heads up,” wrote one customer.
- “I signed up for a cheap trial with Noom. It was advertised as less than $30, and now they have taken $159 out of my account today, a month later. This charge was not made clear when I signed up for this ‘cheap trial.’ I would like a full reimbursement,” wrote another.
One reviewer called Noom a “fraudulent business” and stated that Noom did not inform them of “any annual charges” when downloading the app.
The Value of Business Transparency
Nearly 90% of Americans believe in the value of business transparency, and more than 70% of consumers are open to paying more when complete transparency is assured, according to a report from Sprout Social.
Business transparency should be reflected in all aspects of your company, even if it means losing customers. Having honest and clear guidelines for subscription cancellations can benefit both customers and businesses.
“When someone goes to cancel, you shouldn’t just let them leave. You shouldn’t hold them hostage either, but you want to add a little bit of friction,” said Patrick Campbell, CEO of Profitwell, at SubSummit 2021.
Campbell mentioned that adding a one-to-two question survey could also prove to be beneficial with questions like “What was great about the product?” and, “Why are you leaving?”
These questions can help subscription businesses develop new strategies that will increase their retention rates while also refining their offerings.
The long-lasting relationships subscriptions strive to maintain with consumers can be damaged by a lack of business transparency. However, consumers are forgiving, as long they don’t feel constantly betrayed.
Close to 90% of people say they would be willing to trust a business again if the company acknowledges its mistakes and establishes a plan to rectify them. While Noom is denying the accusations, establishing more transparency in its policies might help the weight-loss app reconcile with its current and past customers.
- Noom’s $62 million settlement was filed Feb. 11.
- Its lawsuit, filed in 2020, states that Noom offered trial periods and then allegedly locked its users into unwanted payment plans.
- Noom Co-Founders Saeju Jeong and Artem Petakov are eager to move forward with their company and deny all wrongdoing.
- Promoting business transparency within your community can help foster customer loyalty and increase trust in your company.