WA AG Bob Ferguson to sue women’s clothing company LuLaRoe
Citing pyramid scheme structure, other issues
OLYMPIA, Wash. — In a statement released on Friday, Washignton State Attorney General Bob Ferguson outlined his plans to sue LuLaRoe, a women’s clothing company. Ferguson says the multi-level marketing business’ bonus structure “constitutes a pyramid scheme.” He says they also misled consultants with deceptive claims about the company’s operating policies.
If the court rules that LuLaRoe broke the law, Ferguson says he will seek up to $2,000 in penalties per violation in addition to fees and other relief. He says he will also attempt to recover lost funds for Washington consumers affected by the company.
The California-based company sells leggings and other women’s clothing. The initial fee that LuLaroe “Independent Fashion Consultants” pay when they come on board can range from $2,000 to $9,000. Washington state initially had more than 3,500 LuLaRoe consultants since early 2014. There are now less than 2,000 still active.
Ferguson’s office says that between 2014 to halfway through 2017, consultants were paid monthly bonuses that were based on how much clothing they and their recruited consultants bought. This structure incentivized individuals to recruit, rather than sell LuLaRoe’s products.
One Washington woman told Ferguson’s office in a complaint that, “[I] was told I could make 12,000 [dollars] a month by a Danielle who is my sponsor and never helped me.”
This person’s parents had taken out a loan of more than $10,000 to help her start her at LuLaRoe.
The company also allegedly marketed their model as one that could make consultants “60 to 75 thousand dollars per year” by only working 20 hours per week. LuLaRoe also ensured consultants that they could make more than $10,000 dollars per month.
The majority of Washington state residents who were involved with LuLaRoe reported they had been paid less than $10,000 dollars in profits, and almost one-third had suffered economic losses.
The company also promised 90 and 100 percent refunds for consultants who wished to stop selling LuLaRoe products. Consultants were told they could return items they had purchased in the last year, but some never recieved their refunds. One woman returned $3,500 worth of items, and still had not recieved her refund six months later.
Ferguson urges any Washington resident who has experienced difficulties with LuLaRoe to contact the Attorney General’s Pffice Consumer Resource Center at 1-800-551-4636. You can also file a complaint here.
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