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SmileDirectClub Bites the Dust After Crooked Business Practices

By Vaidehi Mehta, Esq. | Last updated on

As Hollywood's favorite aviators, Leo and Tom, can tell you, your smile can really make or break your appeal. But while it's not just celebrities who stand to benefit from a straight set of teeth, not all of the rest of us have the means to afford orthodontics. Plus, who wants to feel like Alicia Silverstone's teenage cartoon personality during their adulthood?

Enter SmileDirectClub, the company that promised to revolutionize teeth straightening by offering invisible aligners at a fraction of the cost. They promised a convenient, affordable, and discreet way to achieve that million-dollar smile, all without the need for regular dentist visits. But are they all they're cracked up to be?

The company recently filed for bankruptcy and began liquidation. Apparently, offering clear aligners at a fraction of the price of traditional orthodontics wasn't the magic formula they hoped for. Now, they're facing lawsuits from customers who claim their DIY smile makeover turned into a dental nightmare. If you happen to be one of the unfortunate Club members, you'll want to read on about how all of this affects you.

Dental Decline

SmileDirectClub has allegedly served over 2 million customers since it started in 2014. However, dental professionals have been raising concerns about the safety and efficiency of the company's products. They pointed to the lack of direct supervision by a dentist during the treatment process and the potential for adverse effects. Some customers reported experiencing dental issues, including nerve damage and tooth loss, after using SmileDirectClub's aligners.

SmileDirectClub also began to face increased competition. The at-home teeth straightening market became increasingly competitive with established brands and new entrants, making it harder for the company to maintain its market share.

At the same time, SmileDirectClub was facing a lot of financial issues, including losses from the business. Despite selling aligners to over two million customers, SmileDirectClub remained unprofitable for years. The company had also accumulated nearly $900 million in debt, making it difficult to operate and invest in growth. Finally, sales of aligners stagnated, failing to meet expected growth.

Finally, this past September, the company filed for bankruptcy. While SmileDirectClub initially sought Chapter 11 bankruptcy protection to restructure its finances, it was unable to secure the necessary funding and ultimately shut down its operations in December 2023.

But the company's management leading up to its breakup wasn't the headache it was facing; there were legal battles that followed along in the middle of all of this. Last December, the District of Columbia's attorney general's office filed a lawsuit against SmileDirectClub.

The lawsuit alleged that SmileDirectClub engaged in deceptive and unfair business practices. The allegations included using non-disclosure agreements (NDAs) to silence consumers, manipulate online reviews, and hide information. These NDAs prevented customers from publicly sharing their experiences with SmileDirectClub, including posting reviews or filing complaints with regulators. In addition, SmileDirectClub was accused of blocking customers who were injured by its services and falsely advertising its products and services.

In June 2023, SmileDirectClub reached a settlement with the D.C. AG to resolve the charges regarding its refund policy. The first part of the settlement involved the NDAs. The company agreed to release over 17,000 customers from NDAs that they had signed as part of receiving a prorated refund after the 30-day trial period. It acknowledged that this practice violated the D.C.'s Consumer Protection Procedures Act. As the second part of the settlement, SmileDirectClub agreed to pay $500,000 to the D.C. government.

There were also some additional terms of the settlement laying out what SmileDirectClub had to do to make good while it was still operating in the months before it would eventually file for bankruptcy. The company agreed to revise its refund policy to remove the NDA requirement. It also agreed to create a process for notifying customers who were bound by the NDAs and allow them to opt out. After the settlement, the company was prohibited from using NDAs to suppress negative reviews or silence customer complaints going forward.

This settlement was significant because it brought to light SmileDirectClub's practice of using NDAs to silence customer complaints and limit negative reviews. It also set a precedent for other companies operating in the at-home teeth straightening market to be more transparent and accountable to consumers.

Company Tries to Keep Customers on the Hook

But when the company went bankrupt and shut down last week, things got sticky for its active customers. In announcing its closure, the company wrote on its website that all its operations would cease immediately, and that aligner treatment and customer support was no longer available for existing customers. New customers who had already paid for an order of aligners but had not yet received them were also out of luck. The company wrote: “All orders that have not yet shipped have been canceled at this time, and you will not receive your aligners."

Of course, many customers were already out of pocket. Some had already paid in full for their treatment plans. Others were on a payment plan, but the company wasn't letting even them off the hook. It wrote: “SmilePay customers are expected to continue to make all monthly payments until payment has been made in full per the terms of our SmilePay program." Further, the aligners sold by the company are no longer covered under its "Lifetime Smile Guarantee".

What Can Affected Customers Do?

What does all of these mean for existing customers, practically? Unsurprisingly, there's a lot of confusion. Some people are maintaining that they're “free" from making future payments. The Reddit community of upset Club members, among other customers, are calling for a breach of contract lawsuit. The future is uncertain, though it's certainly possible that a class action lawsuit could be cobbled together in the next year.

For now, it might be in your best interest to read up on your legal rights at our resource pages on Product Warranties and ReturnsResolving Consumer Complaints, as well as our articles about if you can start your own class action and what to do if you get notice of a class action you might be part of. Finally, if you think you'll need legal advice, it may be good to look to a consumer protection attorney in your state.

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