Hy Cite Corporation has agreed to pay about $1 million to settle charges brought by California Attorney General Edmund G. Brown Jr. and the Los Angeles Department of Consumer Affairs (LADCA), alleging that the company used discriminatory business practices and false advertising in the sales of its high-priced Royal Prestige cookware to California consumers.
This is the Attorney Generals second settlement agreement with Hy Cite Corporation for similar consumer fraud tactics.
Hy Cites sales approach has been to scare people into buying high-priced pots and pans by telling customers that the cookware in their own home was unsafe, said Attorney General Brown. We wont tolerate this type of predatory consumer marketing in California. This settlement will put an end to Hy Cites bogus chemical tests and predatory lending terms and ensure that the company treats its customers fairly and honestly.
Hy Cite Corporation sells high-priced cookware targeting Latino consumers and neighborhoods through in-home demonstrations. Hy Cites salespeople allegedly lied their way into peoples homes by telling consumers that they had won a prize or by asking them to participate in opinion polls.
Once in consumers homes, the salespeople often used high-pressure sales tactics and deception to convince consumers to buy the expensive cookware. Salespeople scared consumers into believing that cookware made of non-stick materials or aluminum would make them sick, claiming that Royal Prestiges stainless steel cookware was safer to use, Brown charged.
To convince consumers of their claims, Hy Cite representatives would routinely perform bogus tests on the victims cookware, heating a mixture of baking soda and water in non-stick or aluminum pans, creating a bad-tasting paste through the resulting chemical reaction, Brown said in a statement. The representatives claimed that toxic chemicals were transferred into the familys food, making the consumers existing cookware unsafe for their families.
In many cases, consumers were convinced to finance their purchases through the companys financing plan, but were allegedly misled to believe that the percentage rate was lower than the 20% or more financing rate they were charged. Many people who were scared into buying the products were unable to afford them, fell behind on their payments, and faced collection calls and damage to their credit rating, Brown said.
Higher rates for Hispanics
During the investigation, the Attorney Generals office found that the company had developed two separate credit structures for customers, based on the customers ethnicity.
Hy Cites Anglo customers were offered 90-day payment deferral, contract cancellation, and the use of post-dated checks. These options were not offered to Hy Cites Hispanic customers.
After receiving several consumer complaints about the companys predatory sales practices, the Attorney Generals office began its investigation in March 2007.
Second settlement
This is Californias second settlement with the Hy Cite Corporation for consumer marketing fraud. In 2000, the California Attorney Generals office reached a settlement agreement with Hy Cite Corporation, in which the company agreed to drastically reform its business practices, pay restitution and civil penalties to victims of its predatory sales tactics, and honor a permanent injunction from engaging in these actions in the future.
Under the current settlement, Hy Cite and several of its top executives agreed to pay $1 million as restitution to consumer victims, plus penalties and costs to the Attorney General and LADCA.
In addition to these penalties, Hy Cite has agreed to hire an independent monitor for three years to conduct in-depth interviews with future consumers of Hy Cite products. The judgment also sets forth strict requirements on what its salespeople can say to convince consumers to listen to a sales presentation and what can be said during the sales presentation itself.
