Attorneys general in all 50 states alleged bankrupt company targeted service members and veterans through deceptive sales and lending practices; reach nationwide $96 million settlement
DES MOINES – Bankrupt Virginia-based national retailer USA Discounters, which targeted active duty service members and veterans with allegedly deceptive sales and lending practices, will provide nearly $96 million in relief to those consumers in an agreement with all of the nation’s state attorneys general.
The agreement, approved Thursday by a federal bankruptcy judge in Delaware, includes approximately $215,000 in relief to 94 Iowa consumers.
States alleged that USA Discounters engaged in unfair, abusive, false and deceptive acts and practices.
“The real casualties in this case were active duty men and women, veterans, and their families,” Attorney General Tom Miller said. “USA Discounters zeroed in on them with predatory pricing and debt collection practices,” Miller added. “This settlement will provide victimized Iowans and their families with debt forgiveness and other forms of relief.”
USA Discounters Targeted Service Members with Overpriced Merchandise and Credit
USA Discounters, which in 2014 changed its name to USA Living and also does business as Fletcher’s Jewelers, sold consumer products, including furniture, appliances, televisions, computers, smart phones, jewelry and other consumer goods principally on credit. The company typically marketed to members of the military and veterans, advertising that military, veterans and government employees would never be denied credit for goods purchased from the retailer.
States alleged USA Discounters sold overpriced household goods at high interest rates, often using the military allotment system (automatic electronic transfers withdrawn from military pay), to guarantee payment. States further alleged the company engaged in unlawful business practices through misrepresentations and omissions in advertising, during the loan’s origination, and during the collection process.
States: Abusive Debt Collection Practices Exploited Service Members
The allegations include that, in collecting on consumer debts, USA Discounters engaged in abusive tactics that exploited service members, constantly contacted their chains-of-command, and caused some to lose security clearances and face demotions.
States also alleged that USA Discounters only filed its lawsuits in a few Virginia jurisdictions, no matter the service member’s location, deployment status, or residence.
USA Discounters closed its stores in the summer of 2015 before declaring bankruptcy.
Nearly $96 Million in Nationwide Relief
As part of the $95.9 million settlement, USA Discounters agrees to the following terms, including the estimated nationwide value of the relief:
- 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. This $40 million penalty will be 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 service members the hardest. Service members were often unable to travel to another state to defend themselves in court while stationed at a different state military base or overseas.
The Consumer Protection Division will contact Iowa consumers affected by the settlement.