NEW YORK (AP) -- DirectBuy will pay $500,000 to settle a lawsuit filed by the state of New York that accused the company of bilking people out of thousands of dollars in fees and falsely promising them hefty discounts on goods, the state's attorney general said Thursday.
The direct buying club agreed to issue refunds to New York consumers for memberships and financing fees, while also paying other penalties, New York Attorney General Eric Schneiderman said.
"DirectBuy lured consumers into expensive memberships by promising exclusive member-only deals with substantial savings over retail prices," Schneiderman said. "This company failed to deliver on its promises by taking advantage of consumers who were looking to save hard-earned money."
The Indiana company did not immediately respond to requests for comment.
The lawsuit, which was one of many filed by states across the country, said that DirectBuy charged consumers thousands of dollars in membership fees and promised them exclusive deals on items ranging from furniture to appliances and home goods.
In addition, the company lured in new members by inviting them to open houses featuring free gifts and discounted memberships, but when consumers arrived they were either told that the gifts were not available or free and were pressured into signing up for full-priced memberships immediately, Schneiderman said.
Consumers also complained that once they became members, they did not receive the savings on purchases promised buy DirectBuy, with previously undisclosed fees and shipping costs offsetting any discounts. In addition, many consumers financed their purchases through a company affiliate, which was not properly licensed, the attorney general said.
Other states have already settled with the company, but a larger class-action lawsuit is ongoing.
Under the New York settlement, DirectBuy is required to give consumers three days to cancel their memberships with a refund and it must disclose all costs and fees added to the price of its merchandise.
New York club members who joined after Jan. 1, 2007 and have not purchased $5,000 or more in merchandise, or already received a full refund, are eligible for restitution if they file a complaint by April 1, Schneiderman said.