The DirectBuy shopping club agreed to pay $400,000 toward refunds to certain members and to end "misleading and deceptive" practices, under a settlement announced Thursday by New York Attorney General Eric T. Schneiderman. The company will also pay the state $100,000 in punitive damages.
Schneiderman said that DirectBuy Inc., which sells furniture, appliances and home goods, failed to tell customers they would have to pay fees and shipping costs that wiped out potential savings.
"This company failed to deliver on its promises by taking advantage of consumers who were looking to save hard-earned money," Schneiderman said in a news release.
Memberships to the buying club costs thousands of dollars and some customers borrowed the money through a company affiliate that charged 17.75 percent interest, according to Schneiderman's office.
DirectBuy, based in Indiana, said in a statement, "we felt that the best course of action for our members, franchisees, manufacturers, and employees was to enter into this agreement." The company, which neither admitted nor denied the charges in the settlement, has six franchises in New York, including one in Hauppauge.
Members of the DirectBuy club who meet certain criteria can get a full refund of their membership fees if they file a complaint with the Attorney General, Better Business Bureau, or a consumer protection agency by April 1.
Under the settlement, DirectBuy agreed not to misrepresent the savings consumers could receive and not to tell potential members they will be barred from the club if they don't immediately sign a contract. It also agreed to give new members three days to cancel, to disclose fees and shipping costs for merchandise, and to prove its claims of savings.