You know that feeling you get when you buy brand name item at a discount? It's like you've beaten the system. You're absolved of any shopping guilt because you've saved money rather than spent it, even if that isn't actually the case. With the rise of discount outlet stores—which raked in over $50 billion in the past five years—retailers are keenly aware of our desire to buy things at prices that seem too good to be believed.
Turns out those deep discounts on brand name labels aren't always a steal. In February, Barneys New York was slapped with a class-action lawsuit accusing the luxury retailer of deceptive discounts at their lower-priced outlet stores. The plaintiff, Kristen Schertzer, claims she spent $450 at Barneys Warehouse on items that suggested a 50 percent markdown, when in fact, she alleges the products were never originally intended to be sold at Barneys.
"Barneys' scheme has the effect of tricking consumers into believing they are getting a significant deal by purchasing merchandise at a steep discount, when in reality, consumers are paying for merchandise at its regular retail price," according to the Schertzer's claims.
This not the first time consumers have raised concerns over brand name products sold by discount retailers, many of which produce lower-quality products for outlets, despite the implication they're more expensively made.
Banana Republic, Gap, Michael Kors, Cole Haan and Neiman Marcus have all been accused of selling lower-quality, outlet-only products as if they were deeply discounted items from their higher-end stores, when in fact they're not.
"I think outlet stores are configured to try and nicely mislead most people into thinking they're getting amazing overruns, amazing bargains," Mark Ellwood, author of Bargain Fever: How to Shop in a Discounted World, told Marketplace in 2014. "When you walk into an outlet store, you have to think, this stuff was made to be cheaper."
In their independent investigation, Marketplace "found items in outlet stores made with less durable leathers and different fabrics than the comparable products sold at the retail stores."
Ellwood wasn't surprised by the findings. "The quality of products at outlets varies widely. Remember, this stuff was largely made just to be sold cheaply. So they're going to cut corners," he said.
Coach, one of the labels in Marketplace's inquiry, acknowledged the discrepancies. "Generally, our manufactured-for-outlet product will be less embellished — using less overall hardware and/or simpler hardware, may not have an exterior pocket, or may have a narrower gusset, may have a simpler (non-branded) lining, or may use a flat versus tumbled leather — compared to the retail bag that inspired it," a Coach rep explained.
Meanwhile, Nordstrom Rack—Nordstrom's outlet chain—confirmed to Racked in 2014 "that only 20% of what it sells is clearance merchandise coming from their stores and website, while the rest is bought expressly for the outlet."
In 2018, Neiman Marcus settled a class action lawsuit over false claims in its Last Call outlet stores and promised more transparency on items made for cheaper outlets rather than the flagship stores.
An earlier suit against Michael Kors over their outlet practices resulted in an almost $5 million settlement and an agreement by Kors to replace the MSRP price on outlet tags with "value". So when you see that word on Kors outlet price-tags, it's an indication that the product was made expressly for the outlet and suggests the quality of that item isn't the same as one you might find by the flagship label.
Confused yet? You're not alone. If you really want to know whether your discount is for real, or just a cheaper knock-off with the brand name stamp of approval, the FTC has some helpful guidelines. Here are some things to look out for, according to FTC consumer education specialist, Colleen Tressler:
- Recognize that if you're buying something that looks new and undamaged, the price may be lower for a reason. For example, plastic might replace leather trim on a jacket, or a t-shirt may have less stitching and a lighter weight fabric. If top-quality is important, you may want to keep shopping. But if it's the style or the look that's key, quality may be a lower priority.
- If you're unsure whether the store sells "made-for-outlet" only merchandise or how to tell the difference between it and regular retail merchandise for sale, ask the staff.
- Shop for off-season merchandise. It typically comes at bargain prices.
- Ask about return policies. Some outlet stores let you return unused merchandise any time as long as the price tag hasn't been removed and you have the receipt. Other stores have 90-day or 120-day return policies. Some don't allow any returns.
- Many regular retail stores won't take returns from their outlet stores. That's something to ask your neighborhood retailer about, too.
So the next time you hit the racks and find a brand name handbag with a price tag that seems too good to be true, don't be surprised if it is. The label may be impressive, but the quality less so. That doesn't mean you shouldn't buy something if you love it, just research what you're really paying for before you hit the checkout counter.
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It's easy to forget that the presidency of the United States is a government job just like any other–in that it comes with a stipulated salary and benefits.
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If you've ever wondered what American politicians earn for all their hard work arguing across the aisle and starting Twitter feuds, look no further:
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What do you do when financial hardship hits and you can't make your monthly mortgage payments? This is a question on many homeowner's minds as nearly 17.8 million Americans are reportedly unemployed during the coronavirus pandemic.
When homeowners face financial hardship, such as the loss of a job, they often look to obtain a forbearance agreement from their lender. A forbearance happens when your lender grants you a temporary pause or reduction in monthly payments on your mortgage. Forbearance is not the same as payment forgiveness, in that you still have to pay the entire amount back by an agreed-upon time.
Mortgage lending institutions differ on their mortgage relief policies and qualifications; however, the Coronavirus Aid, Relief, and Economic Security (CARES) Act were signed into law in late March of this year to protect government-backed mortgages.
Federally backed mortgages include:
- Fannie Mae
- Freddie Mac
- The Federal Housing Administration (FHA)
- The US Department of Veteran Affairs (VA)
- The US Department of Agriculture (USDA)
Under the CARES Act, homeowners with a federally backed loan who either directly or indirectly suffer financial hardship due to coronavirus automatically qualify for mortgage forbearance.
Even if your mortgage is not secured by one of these agencies, you still can call and see if you qualify, as many lenders will still offer the option in order to avoid foreclosures.
Under the CARES act, homeowners can claim mortgage forbearance due to financial hardship from COVID-19 for up to 12 months without requiring any documentation or verification. During the forbearance period, mortgage lenders cannot charge late fees or penalties.
Additionally, as long as your mortgage is current at the time you claim forbearance, the lender is required to keep reporting your mortgage as paid current throughout the entire period.
At the end of the forbearance, the CARES act protects consumers from having to make a lump sum payment. Instead, you will be given a repayment plan from your provider. Since repayment options vary, it's important you ask your provider about all of your repayment options.
Possible Repayment Options:
You may be eligible for a loan modification at the end of your forbearance. With modification, the mortgage terms are changed in order to add payments that were missed during the forbearance onto the end of the loan, extending the term.
Another option that may work for some is a reduced payment option. This allows you to keep paying monthly payments at a reduced amount. The amount missed is usually added back into the monthly payments at the end of the forbearance.
Regular payment: $1000 per month
Reduced payment: $500 per month
Payment after forbearance period: $1500 (until caught up)
Balloon payments, or lump sum payments at the end of the forbearance, are prohibited under the CARES Act. However, mortgage lenders may require homeowners who are not protected under the CARES Act to make a balloon payment at the end, so again it is best to check first with your provider.
Mortgage forbearance should only be considered in true financial hardship. In other words, just because of the pandemic, you should not take a forbearance on your mortgage if you can still afford your payments. Likewise, if you are able to start making payments before the forbearance period is up, it's best to do so as soon as possible.
The Next Steps:
Before you get in touch with your mortgage servicer, save time by gathering as much documentation about the mortgage as you can. Also, be ready to list your income and monthly expenses. Due to an influx in calls, financial institutions are experiencing extremely long wait times right now, and having your information at the ready will help.
Have questions ready to ask. Here are some questions you should be asking:
- What fees are associated with the forbearance?
- What are all the repayment options available to you at the end of the forbearance?
- Will you be charged interest during the forbearance period?
If your forbearance is approved, make sure to keep all documentation pertaining to it. Make sure to cancel any automatic payments to the mortgage during the forbearance period, and keep tabs on your credit report to make sure your lender doesn't report the loan as unpaid.
For more information on forbearance, contact your lender and discuss your options. If you need more assistance with understanding your options, you can contact a local agent for the housing counseling agency, or call their hotline at 1-800-569-4287.