CHARLESTON, W. Va. (CN) - DirectBuy, a so-called member's shopping club, uses high-pressure sales tactics to defraud consumers they sell memberships for as much as $5,700 apiece, the state attorney general says. Attorney General Darrell McGraw Jr. claims DirectBuy, Topcat Direct and its president Timothy R. Parker fail to live up to their promotional offers, and reveal the hidden costs of purchases from its warehouses only after consumers have signed on the dotted line.
DirectBuy Inc. is based in Indiana. The attorney general's complaint focuses on TopCat Direct dba Direct Buy of Charleston-Huntington, and their president, Parker.
DirectBuy sells furniture, appliances, remodeling materials and other consumer goods through catalogs at 151 locations in the United States and Canada.
It solicits customers through TV, direct mail and Internet adds that promise "zero hidden markup" on merchandise, "no sales pressure," "30-day free memberships," participation in "$50,000 Home Makeover" contests, and "guaranteed" free gifts for consumers who attend a presentation.
Consumers who respond to the ads are given an appointment to an "open house," which McGraw says is actually "a well-choreographed sales presentation, designed to convince consumers to purchase a DirectBuy membership."
"The sales pitch is high pressure, and emphasizes the 'purchasing power' of joining 'the Club,'" the complaint states. "The sales pitch provides little or no disclosure of what prices are actually offered, or the extra fees consumers will later have to pay.
"DirectBuy gives little or no access to the catalogs themselves or the prices available unless a consumer signs up and pays to become a member."
The complaint continues: "As the sales presentation proceeds, consumers are surprised to learn that they will be penalized if they do not join immediately. "DirectBuy agents warn consumers that anyone leaving the premises that day without joining the club will be barred from becoming a member. Some consumers are led to believe that the prohibition is forever, whereas others are told that they cannot join for different periods, ranging from one year to seven years. ...
"DirectBuy represents that consumers must sign a contract with the store before leaving the open house, and pay or finance several thousand dollars up front, in order to avoid the prohibition against joining. ...
"Consumers at the open house had no prior knowledge that an immediate decision was required, having done little research on DirectBuy beforehand."
DirectBuy's primary product is the membership itself, the attorney general says.
McGraw adds that the "penalty" for leaving a sales presentation - the "permanent ban" on membership - is nothing but a ruse, as "DirectBuy will not turn down their money on a subsequent day."
DirectBuy acknowledges that it is sustained by membership dues, McGraw says, and in no instance have consumers been allowed to take their membership forms home to weigh their decision.
Only after consumers sign up are they given a membership guide that explains the additional fees they must pay to receive DirectBuy's prices, including for freight charges, an 8 percent handling fee, service charges payable to manufacturers, and possible price increases on certain products, without notice. And each purchase can include shipping charges just to get the product delivered to the store, according to the complaint.
McGraw seeks an injunction, civil penalties, restitution, and costs of his investigation. He alleges withholding of contract terms until after the contract is signed, unfair and deceptive sales practices, false representation, failure to disclose the actual prices of goods, and bait and switch advertising.
McGraw sued in Kanawha County Court.
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