DirectBuy, Inc., is a discount buying club with 160 or more retail outlets in the U.S. Like other buying clubs, shoppers must purchase a membership before shopping there. Unlike most other discount buying clubs, however, the cost of a DirectBuy membership can be quite expensive.
Why do consumers agree to pay $3,995 or more for a buying club membership? West Virginia Attorney General Darrell McGraw maintains it takes coercion, deception and high-pressure sales tactics.
McGraw has filed suit against the Indiana-based firm and its West Virginia franchise, DirectBuy of Charleston-Huntington, and its President Timothy Parker.
McGraw said his office began receiving complaints in 2009. Consumers told him DirectBuy pressured them into purchasing memberships costing thousands of dollars. McGraw believes the company coerced consumers by offering free trial offers, guaranteeing free gifts, and offering a variety of other promotions.
Offers not available
When consumers attempted to redeem these offers, McGraw says they discovered the offers were not available as promised. Instead, DirectBuy allegedly focused on selling expensive club memberships through a sophisticated and oppressive sales presentation.
ConsumerAffairs.com has also received a number of complaints about the company from consumers in other states. Carol, of Los Alamitos, Calif., said she went to a sales meeting at DirectBuy and was told that she had to join that day or never come back.
"Since we were going to be building a house we thought it was a good deal," Carol told ConsumerAffairs.com. We paid $4500 for what we thought was a 10-year membership. We were sent a notice 3 years later that our membership needed to be renewed, just when we were getting ready to build our house."
Free visitors pass
According to McGraw, DirectBuy targets prospective members by direct mail, internet, and television advertisements. The solicitations encourage consumers to contact the company to get their "free visitor's pass" to its exclusive showroom.
If consumers sign up for a free pass, they are invited to a sales presentation at the local store. After acquiring the consumers' personal information, McGraw says each consumer is paired with an individual salesperson for a high-pressure one-on-one discussion designed to close the sale.
McGraw calls high-pressure sales tactics "unconscionable," and says company sales representatives offer money back guarantees, promise no hidden fees, and guarantee the lowest prices.
These representations are false, he says, because the written contract specifically prohibits refunds, discloses various hidden fees, and plainly states that "DirectBuy does not guarantee that members will get the best price." He says DirectBuy discloses these material terms only after the consumer has purchased and signed the membership agreement.
After opening an investigation based on consumers' complaints, McGraw said he determined DirectBuy is violating West Virginia law.
"West Virginians should not be pressured with coercive, deceptive, and unlawful tactics into buying expensive club memberships that have little actual value," said McGraw.
The suit seeks a preliminary injunction barring DirectBuy from engaging in unlawful activity in West Virginia until further order of the court. The complaint further requests that the court eventually order restitution, refunds, debt cancellation, and civil penalties.