More Than 2,000 Complaints Prompt Texas AG To Sue Conn’s For Deceptive Trade Practices

May 28, 2009

Conn’s Inc., which operates a store in Bellaire at 5505 W. Loop South, fails to honor product warranties, misleads customers about its products and produces false advertising, Texas Attorney General Greg Abbott said Thursday.


As a result, the State of Texas has filed a lawsuit, under authority of the state Deceptive Practices Act, against Conn’s Inc. and Conn Appliances Inc. of Beaumont.


“The defendants are charged with using high-pressure sales tactics to deceive customers about their extended service warranties,” Abbott said. “Texas law contains important protections to prevent vendors from misleading customers about their goods and services. Today’s enforcement action reflects a concerted effort to ensure the defendant is held accountable for violating the law.”


A Conn’s spokesman wasn’t immediately available for comment early Thursday afternoon.


The suit seeks an injunction preventing Conn’s from removing or destroying any of its records; from engaing in deceptive trade practices; from misrepresenting its products, goods and services; and from issuing misleading advertising.


Abbott’s office said state investigators obtained Conn brochures claiming that two-year extended warranties on appliances protected buyers for two full years after their purchases. But not only did customers not receive two-year warranties, Conn’s warranty agreements stated they didn’t apply during any period covered by a manufacturer’s warranty – which typically runs for a year from time of purchase.


Also, if a product needed to be replaced, “the replacement was not covered by the warranty,” Abbott’s office said in a statement. The state’s lawsuit against Conn’s indicates copies of the warranty agreements were not provided to customers at the time of a sale.


The Beaumont company implies to customers that they will be dealing directly with Conn’s, but in fact Conn’s is not a party to any warranty agreement. Instead, Federal Warranty Service Corp. issues the warranties, and has been paying Conn’s sales commissions.


Publicly traded Conn’s, which includes 69 stores including outlets in Rosenberg, Sugar Land, Katy, Bellaire and Houston, made about $9.8 million on such commissions in its most recent financial quarter, ended April 30, according to filings with the Securities and Exchange Commission.


According to the lawsuit, the attorney general’s Consumer Protection and Public Health Division has received more than 2,000 complaints from people “regarding deceptive business practices” of Conn’s.


The suit seeks up to $20,000 per violation of the state deceptive practices law. It is not clear from the suit whether some or any of the 2,000-plus complaints are being offered as potential violations.


The suit also seeks up to $250,000 in civil penalties, and an order that Conn’s “restore all money or other property taken from identifiable persons…or, in the alternative, award judgment for damages…”