Two class-action lawsuits have been filed against leggings retailer Lularoe claiming the company is running a pyramid scheme that has wrecked women emotionally and financially, reports say.
The women claim they were persuaded to max out credit cards, purchase tens of thousands of dollars in merchandise, and even encouraged to hawk their breast milk to pay for a never-ending and unsellable amount of product.
The lawsuit, filed Monday, says consultants were instructed to keep about $20,000 worth of inventory on hand and were hassled to “buy more, sell more.”
“These incentives mean new consultants are aggressively pressured to continue purchasing wholesale inventory even when the inventory they have is not selling, is unlikely to sell, or is piling up in their garage,” the lawsuit states, according to BuzzFeed.
Even when they did make money from sales, the plaintiffs were encouraged to use it to purchase even more Lularoe merchandise, the lawsuit says.
But often times, the plaintiffs say it was too hard for them to unload the inventory in a market of Lularoe sellers that was outsized and oversaturated. Consultants were encouraged to “have at least 10 items in every size in all styles,” which was a “magic number” of inventory, the lawsuit says.
“The vast majority of consultants sitting at the bottom of defendants’ pyramid were and remain destined for failure and unable to turn any profit,” the lawsuit states. "Some resulted in financial ruin due to the pressure to max out credit cards and to take loans to purchase inventory."
The lawsuit says the company targeted women, especially mothers, with the promise they could work from home with their children.
Plaintiffs who were concerned about the large amounts of money they were investing in the company were encouraged to take out multiple lines of credit or loans, the lawsuit states. Women were even encouraged to sell their breast milk in a video by “mentor” Kim Roylance, BuzzFeed reported.
Problems continued when the women tried to leave Lularoe, which the lawsuit claims changed its refund policy without warning. At one point, its policy allowed sellers to return merchandise for 90 percent of its value, not including shipping; that changed to a 100 percent refund with shipping costs before it was suddenly switched back to 90 percent in September, the lawsuit says.
Some plaintiffs claim they received no refund at all and allege their merchandise was deemed non-returnable. They say they were also told they weren’t legally allowed to sell it since they had quit.
Plaintiff Stella Lemberg says she was promised she could get all her money back if she didn’t sell all the product she was purchasing. She says she tried to return items and was left on hold for hours.
"Ms. Lemberg currently has approximately $20,000 worth of inventory, over 1,000 items of LuLaRoe clothing, in her possession, which have now been subject to LuLaRoe’s 'policy change,' depriving Ms. Lemberg of the ability to return any of her inventory and her right to a 100% refund for that inventory along with shipping costs," the lawsuit says.
Lularoe didn't immediately return a request for comment on the lawsuits, according to BuzzFeed, which said the company sent a statement saying the 100 percent refunds were temporary.
"We decided to end the [100 percent refund] when it became evident that a good number of retailers were abusing the program by returning product in extremely poor condition and providing inaccurate claims, as well as a retailers using it as temporary solution to struggles in their business," the statement reads.