Two years ago, we told you about the not-at-all a discount retailer called USA Discounters that targeted active-duty servicemembers, and not only trapped a number of them in high-cost installment payment plans but then sued customers who fell behind, knowing it was highly unlikely the customer would ever be able to defend themselves. Since then, the company has changed its name, only to go bankrupt, but that hasn’t stopped prosecutors from coming after it. Today, the defunct retailer reached a multi-state settlement deal that could result in USA Discounters customers receiving millions of dollars in forgiven debt.
To recap: USA Discounters was a Virginia-based chain of stores — also doing business as USA Living and Fletcher’s Jewelers — with locations that were frequently found in close proximity to large military and naval bases.
In spite of the name, many of the items sold through USA Discounters were marked up above their retail price. For example, back in 2014 an iPad Mini at USA Discounters was listed at $699, more than double the cost of buying the same device new directly from Apple at the time.
To give the appearance of savings, the store would offer monthly installment payment plans. We found a Samsung 60″ TV on the USA Discounters website being advertised as a “special” with twice-monthly payments that start at $47 each, for a term of 24 months. While $94/month might seem a more affordable alternative to plunking down $960 at once to buy the same set new from Amazon, by the end of the two-year installment plan, you’ll have paid $2,256.
None of this is unique to USA Discounters; a number of rent-to-own or installment plan retailers mark up prices and ultimately charge customers many times what a product is worth. But even among that sketchy niche of the retail world, USA Discounters managed to stick out as particularly egregious.
In addition to the overpriced products and wallet-sucking installment payments, the chain would slap on a variety of fees and other costs that would further increase the amount the customer had to pay.
ProPublica reported in 2014 on a servicemember who purchased a laptop that was worth $650 at most stores, but which had a heavily inflated price of $,799 at USA Discounters. On top of that, there was a $191.56 warranty fee, $17.57 in “credit life insurance,” $248.22 in “credit property insurance,” and $16 for filing and “Specialist” fees, plus taxes and a finance charge of $561.47 — for a grand total of $2993.22.
Shortly after that story ran, the U.S. Consumer Financial Protection Bureaufined USA Retailers for charging that Specialist fee, which was marketed as a charge paid to a third-party company that would represent them in matters involving the Servicemembers Civil Relief Act, a law that protects active-duty servicemembers during some collections proceedings.
Thing is, that “independent” service that received the fee had no other customers than USA Discounters and paid back nearly every dime it collected to the retailer. Additionally, the CFPB said the store was using information obtained by this fee to identify active-duty servicemembers as part of USA Discounters’ most controversial practice: debt-collection lawsuits.
The retailer sued customers who could not keep up with the rate of installment payments on their purchases, but again that’s not terribly sinister. What raised concerns was the way in which USA Discounters filed those suits.
Regardless of where the customer lived at the time of the lawsuit, the complaint would likely be filed in a court in Virginia, which is often too far for customers — especially if they are active-duty military — to travel to dispute.
The SCRA requires that there be a court-appointed attorney to represent servicemembers who aren’t there to represent themselves, but Virginia courts allow the creditor to suggest which attorney should be appointed. According to the ProPublica report, USA Discounters requested the same lawyer to represent servicemembers in each of the 11 cases the reporters looked into.
And that lawyer appeared to have little interest in actually representing the customer’s interest. “I have not been appointed by the court to defend you on the merits of this case in any way,” he would explain in letters to defendants after being selected to represent them.
As the retailer’s business was collapsing, dozens of attorneys general from around the country filed legal actions, accusing USA Discounters of engaging in variety of unfair, abusive, false and deceptive acts and practices, including:
• Making misleading statements about the total price or cost of a good;
• Attempting to evade state usury laws;
• Misleading customers about the characteristics, availability, source, or quality of goods;
• Selling warranties that violated state laws;
• Unlawfully contacting third parties in debt-collection efforts;
• Unlawfully garnishing wages in some states;
• Holding itself out as a discount store when it was not.
Colorado recently settled with the store over allegations that USA Discounters violated state law by filing these non-payment lawsuits against Colorado residents, but in another state’s court.
And today, attorneys general for more than 30 states and the District of Columbia announced a massive settlement agreement [PDF] with USA Discounters that totals nearly $96 million.
In terms of redress for customers, USA Discounters — which does not admit any wrongdoing as part of the deal — will write off all accounts with balances for customers whose last contract was dated June 1, 2012 or earlier. All accounts dated after June 1, 2012 that haven’t been discharged in bankruptcy will have a $100 credit applied. In either case, the company will correct the credit reports of affected customers. In total, that will account for around $74 million in debt being written off or credited.
USA Discounters currently has around $21.2 million in judgments against customers that it obtained in the wrong state. Those too will be written off with credit reports corrected.
“Our servicemembers are not bank accounts for predatory businesses,” says New York Attorney General Eric Schneiderman. “We will not tolerate companies with unlawful business practices and deceive consumers, especially veterans and current members of our military and government.”
“Our military servicemembers give their all to protect our country and our interests around the world, and yet USA Discounters gave its all to fleece them with deceptive marketing and unlawful debt collection practices,” adds California Attorney General Kamala Harris. “This agreement holds USA Discounters accountable for its illegal conduct and compensates servicemembers and veterans for the harm it caused.”
While the settlement specifically lists nearly three dozen states, any state (other than Colorado) can elect to join in on the deal.