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JustFab And Fabletics Are Reviewing Their Business Practices

After a flood of consumer complaints and attention from regulators, the company is hiring an outside auditor to look at its customer service systems.

Posted on November 2, 2015, at 12:28 p.m. ET

Fabletics / Via Facebook: Fabletics

JustFab, the owner of subscription apparel companies like Kate Hudson's Fabletics and ShoeDazzle, is reviewing its sales tactics after fielding a slew of complaints from consumers.

The startup is hiring a third-party auditor to examine its customer service systems and has hired executives to lead "member satisfaction" roles, co-CEO Adam Goldenberg told Bloomberg News on Friday. JustFab has also considered allowing consumers to unsubscribe online, a process that's only possible right now through the phone, Bloomberg reported.

In September, BuzzFeed News reported that JustFab has amassed more than 1,000 complaints with the Better Business Bureau and the Federal Trade Commission, as customers accuse the company of duping them into unwanted subscriptions with recurring credit card charges. Many complaints center around how difficult it is to cancel subscriptions.

BuzzFeed News found that Goldenberg and co-CEO Don Ressler have fielded similar complaints regarding unwanted recurring credit card charges since at least 2004, on a string of businesses selling products including anti-aging shampoo, weight-loss pills and anti-cellulite cream.

Fabletics / Via

Despite that, JustFab was valued at $1 billion in a funding round last year, making it a "unicorn" in Silicon Valley terms. The valuation came seven months after Goldenberg reached one of the biggest-ever deceptive advertising settlements with the Federal Trade Commission over a miracle-weight loss powder called Sensa. An investor in JustFab erased mention of Sensa from a bio of the founders on its website after BuzzFeed News published its story.

JustFab has also reached settlements over its business practices with a group of district attorneys in California, the Florida attorney general, and a separate Florida consumer who filed a lawsuit in 2011.

The company has said complaints come from "a very, very small minority" of unhappy users among its 3.5 million customers, many of whom report pleasant experiences with its brands. The startup is on pace to make $500 million in sales this year.

"As a company that has gone from 0 to in excess of 3.5 million customers in five years, we have had inevitable bumps along the way," a spokeswoman for JustFab told BuzzFeed News in September. "Customer satisfaction is a top priority for us and when there are issues with service, product quality, shipping deadlines, and the like we always do everything we can to make it right."

"It is certainly not the company's intention to have anybody be confused," Goldenberg told Bloomberg. "If someone feels tricked, we lose that customer."

A BuzzFeed News investigation, in partnership with the International Consortium of Investigative Journalists, based on thousands of documents the government didn't want you to see.