State attorneys general from six states, including California, and the Federal Trade Commission have reached a settlement with room and roommate-finding platform Roomster and its owners, according to California Attorney General Rob Bonta.
As part of the settlement, Roomster will pay $1.6 million to state plaintiffs for consumer restitution. The company reported $6 million in revenues in 2022.
In August 2022, attorneys general and the FTC sued Roomster and owners John Shriber and Roman Zaks alleging that, in violation of federal and state consumer protection laws, the company purchased thousands of fake positive reviews to promote its app and fraudulently portrayed rooms and roommate listings to be verified and authentic.
The most recent settlement, which was announced Monday and requires substantial changes to the company's business practices, resolves the lawsuit. The state plaintiffs include the attorneys general of California, Colorado, Florida, Illinois, Massachusetts and New York.
With a special focus on lower-income renters, Roomster is a platform that allows users to find rooms and roommates in cities and towns across the globe.
The company charges subscription fees to potential renters, allowing them to message potential roommates and landlords. Roomster is the world's largest online social network for roommates, claiming 4 million active listings.The New York City-based firm was founded in 2003.
“Our coalition's investigation revealed that Roomster was, in simple terms, conning people seeking rental housing,” Bonta said in a statement. “That's why we sued the company last year. Today, as a result of the hard work by our legal teams, we're holding Roomster accountable for its illegal conduct.”
The company and its owners are also prohibited from paying for or incentivizing reviews, using biased reviews to promote their services, and misrepresenting listings and any other materials to its consumers. These terms are applicable to any future entities created by Shriber or Zaks.
Roomster, Shriber and Zaks will also be required to monitor and halt business with affiliates who engage in deceptive practices.
If the company and its owners fail to make their required payment, violate the terms of the settlement or are discovered to have misrepresented their financial position in settlement negotiations, they must pay a suspended judgment of more than $47 million.
In a related settlement, allegations that the review sales business AppWinn and its owner Jonathan Martinez had violated false advertising and unfair competition laws by promoting Roomster through fake online reviews were resolved.
The settlement required that Martinez comply with injunctive terms and pay $100,000 to the states.
A lawyer for Roomster did not respond for comment.
Helena Getahun-Hawkinsis a reporter with Bay City News.