Friday, September 30, 2016

A.G. Schneiderman Announces Coalition Settlement With National Business Targeting Military

USA Discounters To Provide $95.9 Million In Relief; Assessed $40 Million Penalty
  Attorney General Eric T. Schneiderman today announced a multistate settlement with retailer USA Discounters, also doing business as USA Living and Fletcher’s Jewelers, to resolve the states’ claims of deceptive trade practice against the company. The state Attorneys General charged that USA Discounters engaged in unfair, abusive, false and deceptive acts and practices. The deceptive practices included targeting servicemembers and hooking them into deceptively usurious loans, false advertising and illegal collection practices. The company would also sue servicemembers out of state where they were unable to defend the action, ultimately taking default judgments against them. The approximate value of the restitution to consumers in New York State is $1.8 million dollars and will impact approximately 759 New York consumers.
“Our servicemembers are not bank accounts for predatory businesses, and I will take every measure to protect them from abusive practices,” said Attorney General Schneiderman. “We will not tolerate companies with unlawful business practices that deceive consumers, especially veterans and current members of our military and government.”
USA Discounters sold consumer products, including furniture, appliances, televisions, computers, smart phones, jewelry and other consumer goods on credit it provided. The company targeted sales to members of the military and veterans, touting that military, veterans and government employees would never be denied credit for goods purchased from the retailer. The bad business practices further included that USA Discounters constantly contacted servicemembers’ chains-of-command and caused some servicemembers to lose security clearances and face demotions. The states also alleged that USA Discounters only filed its lawsuits in a few Virginia jurisdictions, no matter the servicemember’s location, deployment status, or residence. In addition, the states alleged USA Discounters sold overpriced household goods at high interest rates, often using the military allotment system to guarantee payment. These unlawful business practices were secured through misrepresentations and omissions in advertising, during the loan’s origination, and during the collection process. For impacted servicemembers, the company’s practices would taint their credit and, under the Uniform Military Justice Code, jeopardize their security clearance and therefore their jobs.
USA Discounters closed its stores in the summer of 2015 before later declaring bankruptcy.
Under the terms of the resolution, USA Discounters will provide relief to certain former and current customers. The total estimated value to consumers for these restitution measures is approximately $95.9 million, primarily benefiting active and veteran servicemembers. Namely, USA Discounters will:
  • Write off all accounts with balances for customers whose last contract was dated June 1, 2012 or earlier, and correct the negative comment from the company on those consumers’ credit reports (Approximately $71 million);
  • Apply a $100 credit to all accounts whose contracts were dated after June 1, 2012, which were not discharged in bankruptcy, and correct the negative comment from the company on those consumers’ credit reports (Approximately $2.89 million);
  • Write off all judgments not obtained in the correct state, and correct the negative comment from the company on those consumers’ credit reports (Approximately $21.2 million);
  • Credit all judgments that were obtained in the correct state against members of the military with a credit equal to 50 percent of the original judgment amount (Approximately $728,000);
  • Pay a penalty of $40 million to the states, subordinated to all secured, administrative, priority, and unsecured claims that are allowed in the bankruptcy case.
State Attorneys General focused on the judgments obtained in a state different from where the debtor resided because it impacted servicemembers the hardest. Servicemembers were often unable to travel to another state to defend themselves in court while stationed at a different state military base or overseas.

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