Nonprofit defends questionable purchase program for state workers
Posted December 9, 2013
Updated February 10, 2015
Raleigh, N.C. — The head of North Carolina's 55,000-member state workers association is defending the group's decision to offer an employee-purchase program that appears to over-charge customers on products that they can pay off over a 12-month period through payroll deductions.
"This is primarily for those folks who are members of the State Employees Association who have really bad credit or no credit or are in a bankruptcy situation," said Dana Cope, executive director of the State Employees Association of North Carolina. "So, it's not for everybody."
The member-run board of the SEANC partnered with the program, called Purchasing Power, in 2008, Cope says, as a way to help members pay for computers for their college-bound children.
Over the years and at the request of members, he says, more high-priced items have been added to the product line-up, which includes everything from the latest laptops and tablet PCs to kitchen appliances to luggage.
The prices offered by Purchasing Power, according to Cope and Elizabeth Halkos, the company's chief revenue officer, are no more than around 30 percent above the retail cost.
For example, a 16GB iPad from Apple priced Thursday on Purchasing Power's website was $945.83, while the same model iPad on Apple's website was $499.
Halkos says the company's pricing initially appears high but that Apple's price doesn't factor in the cost of shipping, a 2-year warranty and a tablet case – which are included in Purchasing Power's pricing.
Purchased separately, the final cost of the iPad from Apple, as well as a $99 2-year warranty, and a $49 case – shipping is free – would be $647.60 before sales taxes.
That's a cost difference of $298.23, or 31.5 percent.
"This is a program of last resort. It's there as a safety net for those folks," Cope said. "It's an emergency purchasing program for people who can't afford it otherwise. It beats going to the pawn shop or the local loan shark down the street."
Halkos says the cost of the products her company sells includes the cost of a warranty and delivery costs. It's interest-free, she says, and customers aren't faced with unexpected fees.
"We are not in the business of taking advantage of our customers. We constantly monitor the market prices and re-evaluate ours," she said. "We're a leading company with a proven track record and would never try to take advantage of anyone."
Cope says the SEANC does not profit from the program, but it does receive an administrative fee that pays for a full-time and a part-time employee who administer the program.
Some SEANC members, however, take issue with the program, saying they question whether a group charged with looking out for state employees should be offering such a program.
Lorrin Freeman, clerk of Superior Court in Wake County, oversees 160 state employees.
"The thing that really concerns me about the program is that it is suggested that, if you go to the state employees association website, that it's a program in which you can save," Freeman said. "If you look at the prices of items in the pamphlets that are sent to all of us as members, clearly it's not. Many of the prices are well in excess of what I could walk into a store and buy these products for."
But Cope says employees don't see it that way.
Since a Nov. 25 WRAL News report on Purchasing Power, he says, he's received more feedback from people wanting to know more about the program than those who complained.
He also adds that customers know what they are signing up for from the beginning.
"Before you even enter into this program, we're very clear to them: This is not a group-buying program. You're not going to save money," Cope said.
Still, Freeman says, the over-cost doesn't make it right.
"I'm very concerned about the fact that the state employees association – which does do some great things on behalf of advocating for state employees – is enticing people to participate by having their logo on the marketing materials, by having on their website an indication that they are saving money by doing this," she said. "I think it's misleading. I think it's unfortunate that they would be participating in this. I would hope that it would be something they would look at seriously."
State employees, she says, have had a single 1.2 percent cost-of-living raise during the past five years – even though, the cost of living, according to the Labor Department, has gone up 9 percent.
Halkos says that's exactly why the program exists.
"The predicament of individuals across the U.S., frankly, is that they don't have the ability to afford $1,000 up front," she said.
Seventy-six percent of Americans live paycheck to paycheck, Halkos says, and as part of a company survey, 94 percent of customers indicated that the program reduces their financial stress because there are no hidden fees and the payments last only 12 months.
"The program is for budget-conscious people who want to buy name-brand products without using cash or credit," she said. "We focus on transparency with our pricing – there are no late or hidden fees, or extended payment terms associated with the program. We offer customers a wide range of products and the opportunity to purchase them through manageable payments."
Freeman says she hopes state employees considering the program will look at all their options.
"I want to make sure that, just because (the purchase program) comes in with the logo of the state employees association, that (members) don't just jump on this thinking it's in their best interest," Freeman said. "I hope that they really do their homework and realize that there might be other options out there."
Cope says he understands the concern and says the SEANC's relationship with Purchasing Power is always being evaluated.
Just this year, he says, both entities entered into a new agreement that resulted in lower product prices.
"We're going to make sure that we give the absolute best product line to our members. That's why we exist," Cope said. "We don't exist to perpetuate ourselves as an organization. We exist to provide a benefit to our members and state employees."