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November 01, 2017 10:02 PM

Former LuLaRoe Consultant Stuck With $5k In Inventory

Sioux Falls

It's famous for colorful women's leggings and has had more than $2 billion in retail sales so far this year. But LuLaRoe has also faced a flurry of complaints and lawsuits over its business practices and quality of clothing.  

The multilevel marketer is now facing a $1 billion lawsuit filed by women who signed up to sell the clothes.  They claim the company is set up like a pyramid scheme. 

There are plenty of local LuLaRoe consultants — "too many" says one woman who was one of the first in the area. 

"It did bless my family and exceeded my expectations, but it was a lot of work,' Kimberly Albers said. 

Albers, a full-time nurse, signed up to sell LuLaRoe in January 2016. It was a big upfront investment which she put on a credit card.

"The minimum purchase was $5,000 and you could purchase $9,000 of inventory, just in your initial shipment," Albers said.

The new $1 billion lawsuit against the company alleges that consultants were told to borrow money: Take out credit cards, and some were even asked to sell their breast milk, in order to purchase more inventory.

Kennecke: Did you get pressured to buy more?

Albers: Yes. They did say the more inventory you have, the more you're going to sell. Our bonuses used to be figured in on how much we bought from company, not how much we sold, so they were very encouraging on buying more inventory.
Albers says consultants recruited others to sell under them and earned bonuses on how much inventory they purchased as well. Albers says LuLaRoe later changed its bonus plan to reflect sales of items.

"My first year exceeded my expectations, but sales had really slowed and it was harder and harder to book parties and pop-ups as we would call them and I just thought it was time to be done,"Albers said.

Albers was counting on being refunded 100 percent of the wholesale amount for her leftover inventory as promised by LuLaRoe, because she still had 15 boxes with 300 items, worth about $5,000 now sitting in her basement.

"I had to itemize each item of how many I had. The form I filled out stated 100 percent buyback, you will receive shipping labels. I had to fold up and put back into bags to ship back to the company — that took me hours," Albers said.

But in September LuLaRoe changed its policy after Albers resigned from the company.  LuLaRoe now refunds only 90 percent, no longer provides free shipping and has put more conditions on which clothes it will take back.

"If you received any bonuses, that amount of money will be taken off what you receive back. So if I do spend hundreds of dollars to ship these boxes back, I don't even know if I'm going to get anything back from them. If we had resigned before the policy changed, they should honor their commitment, because that's what we thought was going to happen," Albers said. 

A separate lawsuit was filed last month in federal court over the buyback policy change. That lawsuit accuses LuLaRoe of advising consultants to use the 100 percent buyback and free shipping policy to recruit more consultants for LuLaRoe. 

LuLaRoe told CBS News it will vigorously defend against the allegations in the lawsuits and are confident it will prevail.

LuLaRoe says the vast majority of its retailers are successful and are happy with their experience.

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