LuLaRoe Scam Sued And Complaints Flood BBB
The LuLaRoe scam has been sued after a recent flood of customer complaints made to the Better Business Bureau, claiming in some cases that they were charged incorrect sales tax and double-charged for merchandise. They also complain that the company’s products were of poor quality and that they had difficulty reaching customer service to discuss their problems. At the time of this post the BBB has given LuLaRoe a grade of “F”. I normally do not trust the ratings of the BBB. It is best to look at the actual complaints that are made by customers.
LuLaRoe was founded in 2012 by Deanne Stidham. LuLaRoe clothes are sold using MLM. The salespeople, known as “fashion consultants,” are incentivized to sign up their own network of consultants. Many consultants are stay-at-home moms, who buy inventory and sell it to friends and contacts at parties they organize and online through Facebook. On top of the money earned from product sales, consultants also receive 5% of each new recruit’s wholesale product purchases, according to details in the LuLaRoe compensation package. To-date, the company has signed up more than 24,000 fashion consultants and an additional 16,000-18,000 are waiting to be added to the team, despite the hefty $5,000-6,000 up front investment required to get started. – Source Forbes.com
Here are some of the LuLaRoe BBB complaints I think you will find interesting:
Do not join or buy from this company. They offer sub-par product at high prices. There is no vetting or requirement to become a consultant, other than $5,000+ for an initial inventory investment, plus costs of supplies, plus the ability to purchase at least $500 in inventory/month. Now, you are required to purchase an iOS device in order to continue doing business with the company. You are required to purchase minimum amounts in order to maintain active status and in order to earn bonus compensation.
LuLaRoe is charging sales tax on clothing to customers living in tax free areas. LuLaRoe is requiring it’s employees to charge sales tax on clothing based on where the employee is residing, despite customers residing in states/areas where there is no sales tax on clothing. Most recently happened… today (X-XX-XX) where an employee charged me sales tax ($1.49 on a $25 item Order #XXXXXXX ) on clothing I purchased, but I live in Allegheny County of PA where we do not pay sales tax. I order from Target and Express who’s central location is in a state with clothing sales tax, but I am not charged sales tax on clothing as it is not required per PA law. It is against the law to charge customers sales tax in areas where they do not collect sales tax on clothing. X-XX-XX: $2.52 sales tax on a $42 item. X-XX-XX: $0.94 on a $20 purchase.
I bought a pair of leggings and followed the directions to wash them and they got holes in them. I bought a pair of leggings in June of 2016 and have only worn them a few time and washed the way the tag said to and line dried them. They got many holes in them and I emailed the company twice and… did not get a response.
I have quite a few pieces of Lularoe’s clothing. I am finding that on the first time I’m wearing the leggings or if I’m lucky maybe the 2nd time, they are falling apart. Mostly starts with tiny holes all over the place. It’s almost like the fabric is disintegrating. I have now had 5 pairs that are falling apart. The worst part is, if you don’t remember sepcifically who you bought them from you can’t get a refund. For extremely expensive leggings $25 they should be a much better quality.
A lawsuit that may turn into a class action lawsuit has been filed because of the incorrect tax collection issue:
According to the Feb. 17 lawsuit filed in U.S. District Court in Western Pennsylvania, LuLaRoe’s independent representatives are required to use a proprietary online point-of-sale software called “Audrey” that automatically charges customers sales tax based on the location where the salesperson is based rather than the taxing authority where the customer is located.
“Defendant overcharges buyers up to 10.25% every time a consultant who lives in a jurisdiction that taxes clothing makes a sale where delivery is made to a jurisdiction that does not,” said the suit, which is seeking class-action status. It added that LuLaRoe “is aware of these tax collection and assessment procedures and knows how to assess sales tax on its clothing sales.” – Source cbsnews.com
Here is how this MLM opportunity is presented:
The average annual bonus payments made by LuLaRoe to ALL U.S. Consultants at all ranks (which includes Eligible and Ineligible Consultants) in 2015 was $91.65, and the median annual bonus payments made to ALL U.S. Consultants at all ranks in 2015 was $85.80.
The average annual bonus payments made by LuLaRoe to Eligible U.S. Consultants at all ranks in 2015 was $424.81, and the median annual bonus payments made to Eligible U.S. Consultants at all ranks in 2015 was $397.69.
An “Eligible” Consultant is a Consultant who has sponsored at least one other Consultant in the Consultant’s sales team and has met the personal production requirements set forth in the Leadership Bonus Plan. An “Ineligible” Consultant is a Consultant who has not met these requirements.
In 2015, 78.43% of U.S. Consultants were Ineligible and therefore did not receive any bonus payments from LuLaRoe. – Source lularoe.com
LuLaRoe Sued And Complaints Flood BBB Conclusion
LuLaRoe has some serious issues that are affecting product quality and tax collection. Consultants are paying thousands of dollars to start this MLM business opportunity and hundreds per month to continue in the business. The vast majority of consultants are making little or nothing in return. I would avoid this business opportunity.