LuLaRoe, the popular women’s clothing line touted by tens of thousands of consultants around the country, is the subject of two class-action lawsuits filed by sellers who said they were duped into spending money on inventory that could never be sold.
The suits claim the company is a pyramid scheme that urges sellers to go into debt to purchase inventory. Initial start-up costs to sell LuLaRoe are around $5,000 but consultants were urged to spend much more with the promise that any unused inventory could be sent back to the company for free with a 100 percent refund.
“Consultants are instructed to keep around $20,000 worth of inventory on hand, and are inundated with the phrase ‘buy more, sell more,'” one of the lawsuits said. “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.
“When consultants could not afford to purchase inventory, defendants and their representatives encouraged them to borrow money, get loans, take out credit cards and some were even asked to sell their breast milk to attain funds to purchase inventory,” plaintiffs claim.
“Recruits were told that the opportunity entailed “part time work for full time pay. This was not the case,” the suit claims.
Another suit claims LuLaRoe misrepresented its refund policy, making it difficult if not impossible for consultants to receive their money back for unsold products.
LuLaRoe offered 100 percent refunds on unsold items – a policy it now says was only temporary. Those wanting to return items now will receive up to 90 percent and the company will no longer cover the cost of shipping.
The suits were filed Oct. 13 and Oct. 23 in the U.S. District Court for the Central District of California. LuLaRoe has not commented on the suit but has advised consultants who complain on the company’s Facebook page to contact its return department.