by: Consumer Investigator Amy Clancy Updated:
KIRO 7 has uncovered a disturbing trend in local home remodeling: a number of DirectBuy stores have suddenly closed their doors, leaving homeowners with costly contracts worth thousands of dollars that most can’t get out of.
When Consumer Investigator Amy Clancy started looking into DirectBuy, it was because one consumer contacted her, frustrated that he was still paying for his membership even though the DirectBuy showroom he joined had closed. After filing a public records request, Clancy learned a number of DirectBuys in Washington state have recently gone out of business, while their members continue to pay.
Leon Campbell of Port Orchard was the consumer who originally contacted Clancy. He had planned to remodel his kitchen so he joined the DirectBuy in Lacey. Before he'd even made a single purchase, the Lacey DirectBuy showroom closed.
“They were saying that they could save us money on cabinets, for the appliances, for everything,” Campbell told Clancy. “Now, I find out they’re not even there to talk to. So yes, I feel like I’ve been stabbed in the back.”
Campbell signed up for a 3-year DirectBuy membership on credit with a nearly 18% interest rate. He claims he was promised by the DirectBuy salespeople before he signed “that we could cancel at any time during this three-year time frame that we signed for, and that would be the end of it.”
Clancy: "But when you tried to cancel it, what happened?"
Campbell: “I was told ‘no.’”
Campbell says he repeatedly tried to cancel his membership and his $121 monthly payments. When he was told he could not, per the contract he signed with DirectBuy, Campbell filed a complaint with the Washington State Attorney General's office and contacted KIRO 7. Clancy filed a public records request and uncovered 1,443 pages of complaints against DirectBuy filed with the AG's office. Most of those complaints deal with high pressure sales. But fourteen consumers who filed AG complaints within just the past year specifically raise the alarm about store closures. DirectBuy showrooms in Kent, Spokane and Lacey have all gone out of business in recent years. The one in Kennewick closed its doors in March of 2012.
It’s a disturbing trend that has caught the attention of Niki Horace at the Better Business Bureau: “We have seen a pattern in the sense that people are very upset that they’re signing up for the membership and now locations are closing, and consumers are wondering, ‘What do I do with this membership?’”
Despite the complaints, DirectBuy has an A+ rating with the BBB because the company does respond to consumers. But Horace explains, that doesn't mean members' attempts to get out of their contracts are successful. “We can’t really do a lot when you sign a contract,” Horace tells Clancy.
According to the state documents obtained by KIRO 7, DirectBuy members argue their contracts should no longer be enforceable because many stores are no longer open. Some consumers have been successful in their attempts, as Campbell was after his interview with KIRO 7. But the majority of members who complained are still on the hook for payments. DirectBuy simply encourages members to shop the company's website or visit the only DirectBuy showroom still open in Washington state, located in a Bothell office park.
KIRO 7 has learned, holding consumers to these contracts appears to be completely legal.
According to Shannon Smith, an Assistant Attorney General, “if the contract doesn’t provide for a remedy in case the brick and mortar store closes down, you may not have one.”
Smith says, when it comes to any membership contract, consumers should ask questions before signing: “If a consumer says, ‘What happens if you go out of business? What do I do then?’ They should get a satisfactory answer from the business. And if the business says, ‘Well, if we close down you can use our online service, or you can drive across the state and use our warehouse 300 miles away,’ if that doesn’t sound good to you, don’t sign it.”
Clancy asked a DirectBuy spokesman why consumers are held to their contracts even after a local showroom closes. Mike Georgeff says it’s because the company’s growing online options allow DirectBuy to fulfill its promises. Georgeff also explains, more than half of the company’s orders are now placed online.
While going through the 1,443 pages of AG complaint, Clancy also learned that some members were able to get out of their DirectBuy contracts by signing non-disclosure agreements, and some former DirectBuy members Clancy contacted during her investigation refused to comment. So Clancy asked Georgeff why muzzling members is necessary and was told, it's to protect the manufacturers. According to Georgeff, DirectBuy "must insist on confidentiality from members."
For DirectBuy’s comment and answers to Clancy’s questions, click here.
For Clancy’s very simple advice on how to check-out a business during the sales pitch, before you sign a contract, click here.