Bryan Cohen Jan. 18, 2013, 6:50pm

NEW YORK (Legal Newsline) - New York Attorney General Eric Schneiderman announced a $500,000 settlement Thursday with DirectBuy, an Indiana-based buying club, to resolve allegations of deceptive and misleading sales practices.

DirectBuy members pay a fee entitling them to buy merchandise like home goods, appliances and furniture directly from manufacturers and authorized suppliers. The company allegedly used deceptive tactics to induce consumers to buy memberships that cost thousands of dollars and then failed to deliver on the savings promised.

"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. Consumers should be wary of offers that seem too good to be true, especially when companies demand consumers make an immediate decision to become a club member or be barred forever. DirectBuy has been held accountable for its actions."

DirectBuy allegedly charged members previously undisclosed fees and shipping costs, failed to disclose that most purchases were through catalogues, failed to disclose that most shipments went to club locations rather than members' homes, failed to disclose that individual manufacturers determined cancellation and refund policies, and continued to enroll members knowing that certain clubs would soon be closing.

In 2012, Schneiderman successfully opposed a nationwide class-action settlement with DirectBuy that would have extended DirectBuy memberships without any monetary compensation for members.

The New York settlement prohibits DirectBuy clubs in New York from engaging in multiple deceptive practices, including misrepresenting the terms of membership. The company must also add certain policies, such as maintaining a three-day cancellation and refund procedure that is disclosed clearly to consumers.

DirectBuy stores in New York include locations in Latham, Woodside, Hauppauge, Rochester and Elmsford. The company closed stores in Cheektowaga, Dutchess County, Manhattan and Syracuse.

New York consumers who entered into a contract with DirectBuy after Jan. 1, 2007, may be eligible for restitution of their membership fees under the agreement.

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