STATE OF FLORIDA OFFICE OF THE ATTORNEY GENERAL DEPARTMENT OF LEGAL AFFAIRS

In the Matter of:

DirectBuy, Inc. an Indiana Corporation,

d/b/a DirectBuy,

Respondent

AG Case Number: L14-3-1088

ASSURANCE OF VOLUNTARY COMPLIANCE

PURSUANT TO Chapter 501, Part II, "The Florida Deceptive and Unfair

Trade Practices Act,,, Florida Statutes, the OFFICE OF TIIB ATTORNEY

GENERAL, STATE OF FLORIDA, DEPARTMENT OF LEGAL AFFAIRS

(hereafter the "Department") investigated certain business practices of

DIRECTBUY, INC. (hereafter "Respondent"), which currently has one

independently owned and operated franchisee doing business in the State of

Florida. These practices primarily occurred between approximately January 2010

and the present (hereafter "the Relevant Period"). During the Relevant Period,

Respondent had as many as ten franchises in Florida. Respondent has cooperated

with the Department's investigation and maintains that its business practices fully

did and do comply with all local, state, and federal laws and regulations.

Respondent is prepared to enter into this Assurance of Voluntary

Compliance (hereafter "A VC") with the Department without any admission of

wrongdoing and solely for the purpose of resolving this matter. Pursuant to

Section 501.207(6), Florida Statutes, the Department, by virtue of the power vested

in it by said statute, by and through its undersigned Director of Consumer

Protection does accept this AVC in connection with the termination of its

investigation into Respondent's business practices and actions occurring on or

before the Effective Date (defined herein) of this A VC without litigation or further

proceedings.

I. GENERAL

1.1 This A VC is made without trial or adjudication of fact or law and is

being entered into for the sole purpose of resolving disputed claims without the

necessity of protracted and ~xpensive litigation.

1.2 This A VC does not constitute evidence or an admission of any issues

of fact suggesting fault or wrong doing by Respondent or of any violation by

Respondent of any provisions of Florida law.

1.3 This AVC does not constitute an approval by the Department of any

of RespondenCs business practices. Respondent shall not represent directly or

indirectly, or in any way whatsoever, that the Department has sanctioned,

condoned or approved any part or aspect of Respondent's business practices.

1.4 This A VC sets forth the entire agreement between the Department and

Respondent (hereinafter collectively referred to as the "Parties") and supersedes all

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prior agreements or understandings, whether written or oral, between the Parties

with respect to the subject matter hereof. This A VC may be amended by written

agreement between the Parties, subject to a!ly :further requirements under state law.

1.5 The failure of either party to exercise any rights under this A VC shall

not be deemed a waiver of any right.

1.6 The Parties further acknowledge that this A VC constitutes a single

and entire agreement that is not severable or divisible, except that if any provision

herein is found to be legally insufficient or unenforceable, the remaining

provisions shall continue in full force and effect.

II. STATEMENT OF FACTS

2.1 Respondent DIRECTBUY, INC., an Indiana corporation, is a

franchisor that has a single franchise location in Florida. Respondent had as many

as ten franchisees in Florida during the Relevant Period.

2.2 Since at least January 2006, Respondent had sold franchises in the

State of Florida. Those franchisees purported to adopt business practices, policies,

and procedures conforming both to their franchise agreements with Respondent

and to all applicable laws.

2.3 Respondent is a consumer buying club. It attracts Members by

promising such items as furniture and appliances at prices comparable to those

purchased straight from the manufacturer. At times, advertising stated these

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discounts to be up to 30% and in some instances up to 70% less than the

competition. However, to be eligible for these offers, Respondent requires that

consumers be Members of a buyer's club by paying a membership fee. It is

Respondent's position that, as a Member, the consumer has incredible buying

power, and can experience thousands of dollars in savings by purchasing from

among the more than one million brand-name items available through Respondent.

2.4 Many consumers first learned the details of Respondent's club

membership by attending a sales presentation at a franchised location, which from

time to time promised a free gift in exchange for their attendance. Free gifts have

sometimes included Android tablets, restaurant gift cards, or cruise vouchers.

Some consumers assert that they were subjected to high-pressure sales techniques

at the sales presentations. By way of example, some consumers complain they

were told they must sign a membership contract on the same day as the sales

presentation or be forever barred from purchasing a membership. Respondent

disputes any high-pressure sales techniques, and affirmatively states that it has

eliminated and now prohibits any representation in the sales process that

consumers must enroll as Members on the same day as the sales presentation.

2.5 Consumer complaints also allege that during the Relevant Period,

Respondent's franchisees failed to adequately explain the following: the policies

and procedures to Members regarding club benefits; any costs and fees added to

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the price of merchandise including freight and shipping costs, handling fees, and

any other fees; and the right to cancel the membership. Respondent disputes these

consumer assertions.

2.6 Consumer complaints additionally allege that during the Relevant

Period, Respondent's franchisees sometimes were either unable or unwilling to

grant consumers a refund after the expiration of the statutory three-day cancellation

period provided in Section 559.3903, Florida Statutes, representing to the Members

that they were locked into a deal and were ineligible for refunds. Respondent

disputes that its franchisees denied refunds to consumers who timely exercised

their cancellation right.

2. 7 Consumer complaints stated that the purported discounts were

exaggerated and were actually comparable to what they would find from a

different retailer. They also complained that managers at Florida locations simply

reaffirmed that Respondent's prices were inherently lower. The consumers stated

that Respondent failed to match or live up to the discounts that were promised.

Respondent disputes these consumer assertions.

2.8 Moreover, consumers complained that they received letters from

certain of Respondent's franchisees indicating they had won a free Android tablet

if they called the "gifting department." Once they called the phone number on the

letter as instructed to obtain the Android tablet, the consumers were told they have

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to attend a sales presentation. The consumers stated that they were not aware of

the requirement to attend a sales presentation until either they called the phone

number on the letter or they read the very small print on the back of the letter.

Some consumers also stated that, when they called the phone number on the letter,

they were asked if they were between the ages of 25 and 65. If the consumer was

outside that age range, they were sometimes told they did not qualify for the free

Android tablet. Respondent disputes these consumer assertions or that the asserted

issues constituted anything improper or unlawful.

III. DEFINITIONS

3.1 "Clear and conspicuous" (including "clearly and conspicuously,,)

shall mean that a statement, representation, claim or term is readily noticeable and

reasonably understandable. The following shall be considered in determining

whether a statement, representation, claim or term is clear and conspicuous:

(a) Whether it is presented in a coherent and meaningful sequence

with respect to other statements, representations, claims, or terms being

conveyed;

(b) Whether it is in close proximity to the statement, representation,

claim or term it clarifies, modifies, explains, or to which it otherwise relates;

( c) Whether it is contradictory to any statement, representation,

claim or term it purports to clarify, modify, or explain, or is otherwise

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contradictory or confusing in relation to any other statement, representation,

claim or term being conveyed;

( d) Whether it is conveyed by means of an abbreviation and, if so,

whether the abbreviation is commonly understood by the public, or approved

by federal or state law;

( e) Whether it is legible;

(f) Whether it is of sufficient prominence in terms of print, size

and contrast, as compared with accompanying statements, representations,

claim_s or terms, so as to be readily noticeable and reasonably

understandable;

(g) Whether it is at a decibel level and speed so as to be readily

noticeable and reasonably understandable; and

(h) Whether it appears for a duration of time sufficient to allow a

listener or viewer to have a reasonable opportunity to notice, read, and

understand.

3.2 "Effective Date'' shall mean the date that Respondent receives a copy

of this A VC duly executed by Respondent and the Department.

3.3 "Member" refers to a person or entity who purchased a membership

from Respondent or one of its Florida franchisees.

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3.4 "Represent" means to state, or to imply through statements, questions,

conduct, graphics, symbols, lettering, formats, devices, language, documents,

messages, or through any other manner or means by which meaning might be

conveyed. This definition applies to other forms of the word "represent," including

without limitation "representation."

IV. COMPLIANCE

4.1 Respondent shall comply or continue to comply with the following

provisions, and shall make best efforts to ensure that its present and any future

franchisee in Florida as well as Respondent's representatives, agents, owners,

officers, directors, managers, employees, successors, assigns, independent

contractors or any other person who acts under, by, through, or on behalf of

Respondent, including a franchisee, directly or indirectly, or through any corporate

or other device, comply or continue to comply with the following provisions:

(a) Comply with the Florida Deceptive and Unfair Trade Practices

Act, Chapter 501, Part II, Florida Statutes;

(b) Clearly and conspicuously disclose the terms of any gifts or

prizes promised in exchange for attending a sales presentation

or signing a membership contract, as provided in Section

817.415(5), Florida Statutes;

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( c) Honor the terms of any gifts or prizes promised in exchange for

attending a sales presentation or signing a membership contract,

as provided in Section 559.3905(3)(c), Florida Statutes;

( d) Clearly and conspicuously disclose prior to the sale of a

membership any costs and fees added to the price of

merchandise including freight and shipping costs, handling

fees, and any other fees, as provided in Section 559.3905(1)(c),

Florida Statutes;

( e) Respondent shall provide, and shall require its franchisees to

provide and use best efforts to comply fully with, the three

business day right to cancel to consumers in accordance with

Sections 559.3903(1), 559.3904(1), and 559.3904(2), Florida

Statutes, including as follows:

( 1) The membership agreement shall clearly and

conspicuously state that a buyer has the right to cancel

the agreement until midnight of the third business day

after the day on which the buyer attains membership by

receiving access, including online access, to all of the

membership services, as provided m Section

559.3904(2), Florida Statutes;

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(2) A buyer's cancellation shall be accepted when the buyer

gives written notice of cancellation to Respondent at the

address stated in the agreement or contract or delivers the

notice by mail or personal delivery within three business

days of attaining membership by receiving access,

including online access, to all of the membership

services. Written notice of cancellation shall be effective

upon the date of postmarking by the U.S. Postal Service

or other similar delivery service, as provided in Section

559.3903(2), Florida Statutes. Personal delivery is

effective when delivered to Respondent at the appropriate

address;

(3) A buyer's notice of cancellation need not take a

particular form and is sufficient if it indicates, by any

form of written expression, the intention of the buyer not

to be bound by the membership agreement with

Respondent, as provided in Section 559.3903(2), Florida

Statutes; and

( 4) Respondent shall provide the buyer with written

instructions for a "MEMBER'S RIGHT TO CANCEL",

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as provided in Section 559.3904(2), Florida Statutes,

with the additional understanding that the cancellation

period begins to run from the date that the consumer

attains membership by receiving access, including online

access, to all of the membership services.

(f) Provide refunds for all properly cancelled agreements within

ten (10) business days without charging a cancellation fee, as

provided in Section 559.3903(3), Florida Statutes;

(g) Honor all advertised prices in accordance with any

advertisements put forth by Respondent;

(h) Provide all potential Members, at the time of any in-club sales

presentation, with the opportunity to view a list of suppliers and

the nature of the merchandise available to Members, prior to

those potential Members choosing whether to purchase a

membership, as provided in Section 559.3905(2), Florida

Statutes;

(i) Continue to make its "membership guide" available for review

to all potential Members during any in-club sales presentation

and before the potential Members choose whether to purchase a

membership;

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G) Provide mandatory and ongoing training to all employees

sufficient to ensure compliance with the terms of this A VC; and

(k) Refrain from the following conduct:

(1) Making any false or misleading representations when

selling memberships and retail items to consumers,

including but not limited to, inaccurate statements

concerning the terms of their memberships, the savings

consumers will achieve, and the nature and quality of the

merchandise available through Respondent;

(2) Representing that a consumer must sign a membership

contract on the same day as a sales presentation or be

forever barred from purchasing a membership;

(3) Enrolling consumers as Members of club locations when

Respondent knows or has reason to believe that the

location is closing during the term of the membership

contract, unless consumers are first advised of such fact;

(4) Comparing its prices to those of other retailers unless

such price comparisons are based on prices of the same

or comparable merchandise sold by retailers in the trade

area in which such savings claims are made, and at prices

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actually offered for sale within a reasonable period of

time prior to such representations, as provided in Section

559.3905(3)(£), Florida Statutes;

4.2 Within thirty (30) calendar days of the Effective Date of this AVC,

Respondent shall modify the membership agreement utilized by its Florida

franchisee to include the Member's right to cancel the membership as follows:

"MEMBER'S RIGHT TO CANCEL

If you wish to cancel this contract, you may cancel by delivering or mailing a written notice to the club. To prove that you canceled, it is recommended that you send the notice by certified mail. The notice shall state that you do not wish to be bound by the contract and shall be delivered or mailed before 12 midnight of the third business day after you attain membership by both signing this contract and receiving access, including online access, to all of the membership services. The notice shall be delivered or mailed to: (insert name and mailing address of club). If you cancel, the club will return, within 10 days of the date on which you give notice of cancellation, a total refund. It is recommended that you mail the notice of cancellation by certified mail, return receipt requested; check with your post office as to the time when you will be able to mail a certified letter. Be sure to keep a photocopy of the notice of cancellation which you mail."

4.3 Respondent shall preserve and retain all its relevant business and

financial records relating to the acts and practices at issue in this AVC and other

information reasonably sufficient to establish compliance with the provisions of

this A VC for three (3) years from the Effective Date of this A VC. At any point

during the three (3) ·year retention period set forth herein, Respondent shall make

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any and all such books and records available at its offices to the Department within

five (5) business days of any reasonable request.

4.4 For a period of three (3) years from the Effective Date of this A VC,

for. the purpose of further determining compliance with this A VC, Respondent

shall permit representatives of the Department, upon the Department's receipt of a

complaint and upon written request to Respondent, a.ccess during normal pusiness

hours to any office, warehouse, retail location, or facility storing documents, of

Respondent. In providing such access, Respondent shall permit representatives of

the Department to inspect and copy all documents relevant to any matter contained

in thi~ A VC, and to interview officers, directors, and employees, all personnel

involved in responding to consumer complaints or inquiries, and all sales

personnel, whether designated as employees, consultants, independent contractors

or otherwise, concerning matters relating to compliance with the terms of this

A ye. The person interviewed may h~we counsel present. Nothing in this AVC

limits the Department's lawful use of its compulsory process, pursuant to Section

501.206, Florida Statutes, to obtain any documentary, material, tangible things,

testimony, or information relevant to unfair or deceptive acts or practices (within

the meaning of Sections 501.203-501.204, Florida Statutes), or other means

available under Florida law, including, but not limited to, posing through its

representatives as consumers or suppliers without the necessity of identification.

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4.5 Any personal or financial information of consumers in the custody,

control or possession of Respondent or any franchisee shall be securely stored in

such a manner as to reasonably protect against inadvertent disclosure of consumer

information. Except in connection with financing a consumer's membership as

provided in the Privacy Policy section of the Membership Agreement, neither

Respondent nor any franchisee shall directly or indirectly, market, sell, share or

otherwise disclose the name, contact information, or financial information of any

consumer in the care, custody or control of Respondent.

4.6 Future consumer complaints received by the Department may be

forwarded to Respondent to the attention of the DirectBuy General Counsel, 8450

Broadway, Merrillville, IN 46410, or another agent designated by Respondent

whose contact information shall be provided to the Department for future

correspondence. For all complaints forwarded to Respondent from the

Department, Respondent shall provide a written response to Department within

fifteen (15) business days detailing the nature of the consumer's complaint,

Respondent's response to the complaint, and any actions taken to cure and/or

resolve the complaint. Any actions taken by the Department with regard to future

complaints shall not be construed as a waiver of the Department's remedies under

this AVC or approval of Respondenfs actions and/or resolution of such

complaints.

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V. CONSUMER REDRESS

5 .1 Without admitting any liability, Respondent, independent of any

investigation by the Department, represents and warrants that it periodically has

reviewed and continued to improve various aspects of its policies and procedures,

including, but not necessarily limited to, sales practices, delivery, refund and

cancellation procedures, and member service.

5.2 Respondent represents and warrants that as of April 30, 2016, either

Respondent or its :franchisees have offered refunds totaling at least $7 ,516.80 in

total to Florida consumers who filed complaints with the Department or other

entities, including expediting the refunds of Members to whom refunds were

issued, and otherwise have addressed non-monetary concerns of certain consumers.

Additionally, as a result of the ongoing escalation of complaints by the Department

to Respondent, Respondent has provided multiple Florida consumers with other

compensation in the form of Android tablets, gift certificates, and credit vouchers.

VI. STIPULATED PAYMENT

6.1 The parties agree that Respondent shall pay a total of $15,000.00 to

the Office of the Attorney General, State of Florida, Department of Legal Affairs,

pursuant to Section 501.2105, Florida Statutes, as reimbursement of all legal fees,

costs and investigative fees regarding this investigation. Payment shall be made by

cashier's check or other certified funds, made payable to Department of Legal

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Affairs Revolving Trust Fund, and shall be paid simultaneous with the submission

of a partially executed copy of this AVC by Respondent.

VII. ACCEPTANCE

7 .1 This A VC shall become effective upon its acceptance by the Director

of the Consumer Protection Division, who may refuse to accept it at her discretion.

The receipt of or deposit by the Department of any monies pursuant to this A VC

does not constitute acceptance by said Department, and monies received will be

returned if this A VC is not accepted. This document may be signed in

counterparts.

VIII. APPLICABILITY

8.1 This A VC shall be governed by Section 501.207, Florida Statutes.

Pursuant to Section 501.207(6), Florida Statutes, unless this A VC is rescinded by

agreement of the parties or voided by a Court for good cause, subsequent failure to

comply with the terms of this A VC is prima facie evidence of a violation of the

Florida Deceptive and Unfair Trade Practices Act, Chapter 501, Part II, Florida

Statutes.

8.2 Any future violations of this A VC may subject Respondent to civil

penalties and sanctions provided by law.

8.3 The obligations under this AVC shall apply to and continuously bind

Respondent and its affiliated entities (including Florida franchisees), its successors,

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and its assigns. Further, Respondent shall be responsible for the actions of its

officers, directors, agents, servants, and employees, whether acting directly or

through any corporation, subsidiary, division, or other entity, that are in violation

ofthis AVC.

8.4 Respondent shall be responsible for making the substantive terms and

conditions of this AV<:; known to its relevant officers, directors, employees, agents,

and any Florida franchisee.

8. 5 Respondent and its successors and assigns shall be on notice of the

provisions of the Florida Deceptive and Unfair Trade Practices Act, Chapter 501,

Part II, Florida Statutes.

8.6 Respondent shall not, except as provided in ,4.6 above, effect any

change in the form of doing business, or the organizational identity of any of its

affiliated entities, or create any new business entities, as a method of avoiding the

terms and conditions set forth in this A VC.

8. 7 Nothing in this A VC shall be construed as a waiver of any private

rights of any person or release of any private rights, causes of action, or remedies

of any person against the Respondent. In addition, nothing herein shall be

construed to limit or bar any other governmental entity from pursuing other

available remedies against the Respondent for acts and practices addressed by this

AVC.

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FOR DIRECTBUY, INC.:

BY MY SIGNATURE, I affirm that I am acting in my capacity and within my

authority as a corporate officer of DIRECTBUY, INC., and that by my signature I

am binding DIRECTBUY, INC., to the terms and conditions of this A VC.

(print name)

Its: J~ p~Qvvr STATE OF ..::f:nti.1 'anC<..

COUNTY OF . 1-tA I<<....

BEFORE ME, an officer duly authorized to take acknowledgments in the State of

Indiana, personally appeared C. JoseRh fqs·f as , V1'Le. President of DIRECTBUY, INC., and acknowledged

before me that he/she executed the foregoing instrument for the purposes therein

stated, on this cf{:; day of ;t1 tt..y , 2016

Sworn to and subscribed before me this Jl(;;, day of , 2016

JANET L. DAVIDSON Notary Public· Seal

State of Indiana My Commission Expires Aug 14, 2020

Type of Identification Produced:

rint, type or stamp commissioned name of Notary Public)

C. Jose1Jh ~f; ,)fa..f~ iSsu-t:d ;Jr/vers /r'c_ens-e_,

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FOR THE OFFICE OF THE ATTORNEY GENERAL:

Accepted this ..:2. '7 day of YY\.~

r~~ Victoria Butler Director of Consumer Protection Division Office of the Attorney General Department of Legal Affairs 107 W. Gaines Street Tallahassee, FL 32399

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'2016