Roomster is a popular website that matches up potential roommates. It's heavily used by lower-income consumers and students looking for an affordable living arrangement. But a lawsuit charges that many of the listings and reviews are fraudulent.
The lawsuit was filed by six states and the Federal Trade Commission last August.
“Roomster polluted the online marketplace with fake reviews and phony listings, making it even harder for people to find affordable rental housing,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Along with our state partners, we aim to hold Roomster and its top executives accountable and return money to hardworking renters.”
The complaint alleges that Roomster and its owners have taken tens of millions of dollars from largely low-income and student prospective renters who need reliable housing the most and can least afford to lose money. Separately, the FTC and the states filed a proposed order against Jonathan Martinez – who allegedly sold Roomster tens of thousands of fake reviews – requiring him to pay $100,000 and cooperate in the FTC’s case against Roomster.
Roomster denies the charges
The company denied the allegations and filed for a dismissal claiming that it did not know of the alleged violations and that the Communications Decency Act shields them from liability.
But U.S. District Judge Colleen McMahon in Manhattan said Wednesday that the lawsuit cites evidence that "strongly suggests" that Roomster and its executives knew that their platform contained thousands of fake reviews and bogus listings.
She also said the plaintiffs demonstrated "a realistic likelihood of recurrence given defendants' pattern of willful and deliberate behavior over the course of several years" and ordered the trial to proceed.
McMahon also rejected the argument that the Communications Decency Act absolves Roomster of responsibility for its actions. That's the law that holds internet platforms harmless for the statements posted by their users.
McMahon said that law "does not immunize defendants from liability for their own unlawful conduct."
"Illegal and unacceptable"
“There is a term for lying and deceiving your customers to grow your business: Fraud. Roomster used illegal and unacceptable practices to grow its business at the expense of low-income renters and students,” said New York Attorney General Letitia James. “Unlike Roomster’s unverified listings and fake reviews, their deceptive business practices will not go unchecked."
New York-based Roomster operates a website and mobile apps where users can pay a fee to access living arrangement listings, including rental properties, room rentals, sublets, and roommate requests. But the lawsuit says Roomster used fake reviews and other misrepresentations to lure consumers to its platform and pay for access to listings that often turned out to be fake.
The complaint also alleges that Martinez, doing business as AppWinn, deceptively promoted the Roomster platform by providing tens of thousands of fake four- and five-star reviews.