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

Updated: Conn’s Inc., which operates several stores in and around Fort Bend County, 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.”

But Conn’s Vice Chairman Bill Nylin said his company has been attempting for weeks to resolve concerns Abbott’s office has expressed.

“For the past three months, Conn’s has been working closely with the Texas Attorney General’s office in regard to customer concerns. We’ve responded to each request his office has made and have been working in good faith to resolve those concerns,” Nylin said.

Nylin cited a “118-year history of delivering outstanding service to our customers,” and said the 3,200-employee company has an A+ Better Business Bureau rating – the highest possible.

“We have earned this rating based in part on the fact that, during the past year, we had 1.3 million customer transactions throughout our 75 stores in three states,” Nylin said. “The complaint rate, for all our stores, to the BBB was less than one-tenth of 1%.”

However, 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, according to the lawsuit.

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, the suit states.

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.

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 filed with the AG 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…”