Two new class-action lawsuits against leggings retailer Lularoe say the company is running a pyramid scheme, convincing women to max out multiple credit cards, buy tens of thousands of dollars of merchandise, and even sell their breast milk to keep buying clothes the company knows they will never be able to sell.
The lawsuit filed Monday claims Lularoe's main source of income is not sales to customers, but the thousands of purchases by their sellers to build their "inventory."
"Consultants are instructed to keep around $20,000 worth of inventory on hand, and are inundated with the phrase 'buy more, sell more,'" the Oct. 23 lawsuit said. "These incentives mean new consultants are aggressively pressured to continue purchasing wholesale inventory even when the inventory they have is not selling, is unlikely to sell, or is piling up in their garage."
When the consultants did actually make money from sales, they were encouraged by those managing them — called their "upline" — to use that money to keep buying more Lularoe merchandise.
Lularoe also offered bonuses, like designer purses and free cruises, to consultants who bought the most inventory, no matter how much they actually sold to customers, the Oct. 23 lawsuit states.
"Consultants were told that they should have at least 10 items in every size in all styles. This was purportedly the 'magic number' of inventory," the lawsuit states.
The plaintiffs in each lawsuit describe a company that lures in women, especially mothers, with promises of being able to make money while staying home with their children. When their new "business" eventually fails, the plaintiffs claim the company then refuses to refund them for the thousands of dollars of merchandise they have been unable to unload.
When some women expressed concern about the large amounts of money they needed to invest, the plaintiffs said they were encouraged to take out multiple lines of credit or loans. In one video obtained by blog MommyGyver, Lularoe "mentor" Kim Roylance even encouraged women to sell their breast milk.
When women try to get out of the business, the plaintiffs alleged in the lawsuit filed Oct. 13, they said they faced challenges.
Lularoe didn't immediately return a request for comment on the lawsuits, but in a statement about the change in return policy, the company said the 100% refunds were temporary.
The lawsuits said many of the women were attracted to the opportunity to create their own business, and the fact that the company claims to pride itself on helping women succeed.
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Stephanie McNeal is a social news editor for BuzzFeed News and is based in New York.
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