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California Accuses Retailer Of Using Bait-And-Switch Tactics To Lure In Customers

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A Los Angeles-area chain of retail stores is accused by the state of repeatedly misleading customers into thinking they were going to get a good price on merchandise only to be told after they get into the store that the only way to get that advertised price is if they spend more money.

The office of California Attorney General Xavier Becerra announced today that it has filed a lawsuit [PDF] against Curacao, an L.A.-based retailer that largely serves the areas Spanish-speaking community.

Curacao has been around for nearly 40 years, and currently operates a dozen stores, mostly in Southern California, with two locations in Arizona, and one store in Las Vegas.

While the store represents itself as a competitor with the big box chains, the state’s lawsuit alleges that “Curacao victimizes consumers through a variety of unlawful, unfair, and fraudulent business practices.”

Becerra claims that Curacao advertises low prices and easy credit, primarily to an immigrant community with no or limited access to credit. But, alleges the complaint, these ads are “false or misleading,” and in-store employees are allegedly instructed to not sell items at the advertised price unless the customer spends additional money on unnecessary add-ons, like warranties or overpriced accessories.

“Curacao often tells consumers that merchandise advertised by Curacao is either unavailable, or available only as part of a more expensive bundle that was not disclosed in Curacao’s advertising,” reads the complaint. “Curacao fails to honor prices as they are advertised and marked on its sales floor, and fails to supply reasonably expected demand for the merchandise it advertises.”

In some cases, says the state, Curacao employees are adding warranties or additional services to the customer’s order without telling them. The lawsuit claims that employees hide these add-ons by getting the customer to sign a touch screen agreeing to the contract and only then providing them with an itemized bill and a full copy of the agreement.

Curacao customers are often talked into warranties that in many cases were meaningless, alleges the lawsuit. The state claims that store employees would fail to provide customers with copies of, or any information about, these warranties. Those customers who tried to get a warranty repair were frequently denied or had their warranties voided by Curacao, according to the state.

What’s more, the complaint claims that Curacao misled state regulators about the warranties it sells. The retailer had told state authorities that it was selling warranties administered by a third party, when in reality it was allegedly selling self-administered warranties, but without the insurance or financial backing that is required under California law.

The state says that customers who returned products to Curacao would still be charged for installment payments warranties for products they no longer owned, and that customers were charged for third-party warranties that didn’t exist.

But wait… There’s more. Employees allegedly deceive customers about the price and necessity of accessories, falsely telling shoppers these add-on items may be vital to operating their main purchase.

Additionally, says Becerra, sometimes the prices are low on Curacao products because they are used; a fact that is not disclosed to the customer.

Even if a customer does purchase a Curacao product at the advertised price, they could end up paying several times the product’s value if they sign up for the store’s financing program, which is heavily marketed in both the stores and the Curacao website. The complaint notes that Curacao markets this option at the reasonable — for a store credit line — APR or 19.99%, but that most Curacao customers are ultimately given rates that are about one-and-half times that rate at 34.99%.

The state also alleges that Curacao employees are instructed to encourage customers to use up all their available store credit immediately.

If a Curacao customer did fall behind on payments, Becerra says the retailer used illegal debt-collection tactics, like calling customers early in the morning, late at night, threatening arrest and seizure of property. The state claims that these tactics sometimes kept going years after a customer had already paid their debt to Curacao in full.

When Curacao did make good on threats of legal actions against debtors, it allegedly used an unlicensed process server who fabricated proof of service documents to make it appear as if a customer had been served with legal papers when they had not. As a result, contends the complaint, these customers were unable to contest their alleged debt in court but Curacao was able to obtain default judgments and their wages to repay debt the customer might not have owed.

At a press event in L.A. this morning to announce the lawsuit, Becerra labled Curacao’s alleged bad behavior “disgraceful” and “unlawful.”

“Curacao has a right to market its goods but not to take advantage of its customers,” said the attorney general.

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