$500K Settlement Reached With DirectBuy

NEW YORK -

An investigation has revealed that DirectBuy, the buying club, engaged in misleading and deceptive sales practices.

Members of the Indiana-based company pay a fee, entitling them to buy such merchandise as furniture, appliances and home goods directly from the manufacturer and its authorized suppliers.

An investigation by New York Attorney General Eric Schneiderman found that the company used deceptive tactics to induce consumers to purchase memberships costing thousands of dollars, and then failed to deliver on the savings.

“DirectBuy lured consumers into expensive memberships by promising exclusive member-only deals with substantial savings over retail prices. This company failed to deliver on its
promises,” said Schneiderman. “Consumers should be wary of offers that seem too good to be true, especially when companies demand consumers make an immediate decision to become a club member or be barred forever. DirectBuy has been held accountable for its actions.”

Consumers who were members of any DirectBuy club, whether or not it is still open, may be eligible for restitution. DirectBuy locations in New York are:

•DirectBuy of Albany, 356 Troy Schenectady Rd., Latham

•DirectBuy of Brooklyn & Queens, 72-25 Queens Blvd 2nd floor, Woodside

•DirectBuy of Long Island, 20 Oser Ave, Hauppauge

•DirectBuy of Rochester, 45 Saginaw Dr., Rochester

•Direct Buy of Westchester County, 2269 Saw Mill River Road, Bldg 1S, Elmsford

•DirectBuy of Greater Buffalo (closed March 2011), reopened at same location: 4950 Genesee Street, Cheektowaga

•DirectBuy of Dutchess County (closed)

•DirectBuy of Manhattan (closed)

•DirectBuy of Syracuse (closed)

The investigation found that, to attract new members, DirectBuy invited consumers to open houses at their club locations, offering free trial memberships and other incentives such as free gifts and prizes. Once at the open house, however, prospective members found that the gifts were neither available nor free. Instead people were met by a sales pitch, pressuring them to purchase full-price memberships immediately or forever lose the opportunity to become a member.

Members complained that they did not receive the savings promised at the open house by DirectBuy. Instead, they incurred substantial fees and shipping costs, which had not been previously disclosed. In addition, many consumers financed the price of their membership through Beta Finance, a DirectBuy affiliate that was not properly licensed in New York.

In addition, several clubs continued to enroll members, knowing that the club would imminently cease operations.

The settlement prohibits New York DirectBuy Clubs from engaging in deceptive practices, such as:

• Misrepresenting the terms of their memberships, savings and the nature and quality of the merchandise.

• Falsely representing that a consumer must sign a membership contract on the same day as the sales presentation or be forever barred from joining.

• Referring or reporting to any credit agency, or seeking to enforce any legal action, regarding a consumer’s failure to make payment under a membership contract of a finance company not licensed in the State of New York.

• Enrolling consumers as members at club locations that DirectBuy knows or has reason to believe are closing, unless consumers are first advised of such fact.

Among the terms of the agreement, New York DirectBuy clubs will have to maintain a clearly-stated three-day cancellation and refund policy. DirectBuy will be required to clearly disclose — prior to the sale of a membership — any additional costs and fees, maintain proof of all savings claims and comparison-shopping ads, and honor the terms of any gifts or prizes promised in exchange for attending a sales presentation or signing a membership contract.

Under the agreement, New York club members who entered into a DirectBuy contract after January 1, 2007, have not purchased $5,000 or more in merchandise or have already received a full refund, and have filed a complaint relating to their club membership with the Attorney General, the BBB, or other consumer protection agency, but do so by April 1, 2013, are eligible for return of their membership fees. Consumers who purchased a membership from a now-closed New York club location and for whom alternate club facilities are not within a 25-mile radius of the closed location may also be eligible for refund.

Consumers who have not previously filed a complaint and who may be eligible for restitution should file a complaint with the Attorney General by April 1, 2013, and may call the Attorney General’s Consumer Helpline at 914-422-8818.