SmileDirectClub, the dental telehealth company that ceased operations in 2023 following a bankruptcy filing, has agreed to refund $4.8 million to customers who were improperly charged after its closure. The settlement, announced Monday by New York Attorney General Letitia James, will benefit approximately 28,000 affected customers, including 2,265 in New York.

SmileDirectClub To Repay Customers $4.8M : Refunds for Improper Charges

SmileDirectClub customers often paid for their aligner treatments through the SmilePay program, which involved an upfront payment of $250 followed by 26 monthly installments of $89. However, after declaring Chapter 11 bankruptcy in September 2023 and winding down operations in December, SmileDirectClub continued charging customers despite ceasing to provide services.

The refunds, facilitated through SmileDirectClub's payment processor Healthcare Finance Direct, aim to resolve these improper charges.

“Dental care is expensive, and SmileDirectClub promised affordable, quality care but instead extracted thousands of dollars from hardworking people,” James said in a statement. “This settlement ensures that customers get back what they’re owed.”

SmileDirectClub To Repay Customers $4.8M : Timeline of Events

• September 2023: SmileDirectClub files for bankruptcy.
• December 2023: The company shuts down but continues charging SmilePay customers.
• December 12, 2023: The New York Attorney General issues a cease-and-desist letter, citing concerns over ongoing charges for unfulfilled services.

Following the letter, SmileDirectClub updated its FAQ page and referred customers and regulators to Healthcare Finance Direct, which cooperated in the settlement negotiations.

Role of HPS Investment Partners

The repayment plan emerged after HPS Investment Partners LLC, SmileDirectClub’s lenders' agent, confirmed that down payments, payments for retainers, and upfront payments for aligner treatments were not subject to liens. HPS cooperated with the attorney general to ensure customers would be refunded.

Complaints and Consumer Advocacy

The Attorney General's Office noted a flood of complaints from customers who realized they were being charged for services that would never be completed. SmileDirectClub’s updated FAQ initially insisted that SmilePay customers were obligated to fulfill their contracts, intensifying consumer frustration.

Legal Representation and Next Steps

The settlement was led by in-house counsel from the New York State Office of the Attorney General, including Christian Reigstad, Jane Azia, Laura Levine, Darsana Srinivasan, Leslieann Cachola, and Noah Popp.

Counsel for HPS Investment Partners and Healthcare Finance Direct was not immediately available for comment.