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DirectBuy to pay $500,000 to settle N.Y. lawsuit

Rochester Business Journal
January 17, 2013

DirectBuy has agreed to pay $500,000 and adjust some policies to settle charges that it has misled consumers with deceptive sales pitches, state Attorney General Eric Schneiderman said Thursday.

An Indiana-based franchise chain, DirectBuy promises discounts on home furnishings, appliances and other products to consumers who sign up and pay a membership fee. It currently has four New York State locations, including an outlet on Saginaw Drive in Henrietta.

While DirectBuy purports to offer members savings by giving them the opportunity to buy goods directly from manufacturers, consumers who bought merchandise through the chain were often only ordering from a catalog and paying big, undisclosed shipping fees, Schneiderman said. 

Rather than saving money for members, he said, DirectBuy “lured consumers into expensive memberships by promising exclusive member-only deals with substantial savings over retail prices (but) failed to deliver on its promises.”

The Indiana company financed some New York State consumers’ membership fees through its own financing arm, which is not registered as a lender in New York, Schneiderman said. 

Terms of the New York deal makes some DirectBuy members eligible for financial compensation. DirectBuy also agreed to see that its New York outlets hew to new policies including:

Maintaining and clearly disclosing a three-day cancellation and refund procedure;
Disclosing membership costs and fees and extra charges for freight and shipping and handling fees that might be added to price of goods before signing up members; 
Showing proof of savings claimed and showing comparison shopping ads;
Honoring terms of any gifts or prizes promised in exchange for attending a sales presentation or signing a membership contract.

Schneiderman struck a deal with DirectBuy after opposing a proposed settlement last year in a nationwide class action. In that deal, DirectBuy would have compensated consumers by extending the terms of their memberships, a remedy a federal judge in Connecticut and rejected as too paltry. Attorneys general of 26 other states, as well as Schneiderman, turned thumbs down on that offer.

Consumers who have not previously filed a complaint against DirectBuy could still be eligible to collect a payment in the New York settlement if they file a complaint with the Attorney General by April 1.

(c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail service@rbj.net.
 


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