Conn's Accused Of Warranty Wrongdoing
By Alan Wolf -- TWICE, 5/28/2009
Houston — The attorney general of Texas has charged Conn’s with multiple violations of the state’s Deceptive Trade Practices Act related to the sale and administration of the chain’s extended warranties.
According to Attorney General Greg Abbott, customers were sold two-year contracts that in effect only protected their purchases for one year, since coverage excluded the manufacturer’s warranty period.
In addition, defective products were replaced with refurbished goods despite promises of “new, unused items” by sales personnel, and any item replaced under a Conn’s extended warrantee was no longer covered by the agreement, Abbot indicated.
Conn’s also failed to provide customers with copies of the service agreements at the time of the sale, which would have informed them of the exclusions, limitations and other provisions of the contracts, the attorney general said,
Conn’s, which also services manufacturer and extended warranties, was additionally charged with delaying repair appointments for weeks or even months, failing to repair items to working condition, ignoring calls, and ultimately refusing to refund purchases or replace defective items with new products as promised.
According to a report in the Houston Chronicle, Abbott said Conn's had a financial incentive to make repeat visits for repairs because the retailer bills vendors, with a mark-up, for the parts and service work performed on products covered by manufacturer warranties.
Abbott also accused Conn’s of using aggressive, high-pressure sales tactics to pitch the contracts, based on a sales manual that provided scripted responses to customer objections. According to a lawsuit filed by the attorney general, over 49 percent of customers purchased extended warranties for products sold by Conn's last year. The company's commissions from contract sales account for about 5 percent, or $45 million, of its $900 million in annual revenue, the suit stated.
Conn’s countered that it is has been cooperating fully with the attorney general, is working to resolve customer issues, and has made improvements in its customer care and service operations.
Abbott is nevertheless seeking a court order prohibiting the multiregional appliance and electronics chain from “continuing its unlawful conduct,” and civil penalties of up to $20,000 per violation.
In a statement, Conn’s vice chairman Bill Nylin said the company has been working closely with the attorney general for the past three months, has responded to every request from his office, and has been "working in good faith" to resolve customer concerns.
In addition, Conn’s recently created a Customer Help Group to help ensure shopper satisfaction; strengthened its service center management teams in Houston and other markets; and increased the number of service technicians and call service operators and the amount of their training. The improvements were part of the company's regular business practices, Nylin said, and were not prompted by the attorney general’s investigation or the complaints received by his office.
Nylin also cited Conn’s 118-year history of "delivering outstanding customer service,” and its A+ rating by the Better Business Bureau, whose complaint rate for the retailer’s 75 stores and 1.3 million customer transactions last year was less than one-tenth of 1 percent.
According to the lawsuit however, the Houston Metropolitan office of the Better Business Bureau recently terminated its relationship with Conn's as a result of "ongoing deceptive acts and practices."
“Our top priority is providing our customers with a high level of customer service, highly trained and knowledgeable sales personnel, and outstanding product repair service,” Nylin stated. “We take care of our customers’ needs through dedicated customer service call centers in our distribution centers, service centers and our corporate office … When service does not meet our expectations, we take action.”
Nylin added that Conn’s will continue to actively work with Abbott and “look[s] forward to discussing with his office the issues he raised today.”
