A financing company for a chain of electronics stores that pushed costly loans for overpriced electronic gear on American soldiers will have to pony up $3.5 million and take steps necessary to restore soldiers’ rightful credit standing, thanks to a settlement announced this week by New York Attorney General Eric Schneiderman.
The California-based company, Rome Finance Co., Inc., is one of several finance companies involved in litigation with the attorney general; each company worked in connection with retailer SmartBuy, which is also being sued for the fraud operation targeting service members.[Asset Included(Id:700002100656;Type:maDARTAd)]SmartBuy, which operated retail stores close to at least eight military bases across the country, stands accused of buying computers and electronics from major retailers like Sam’s Club and Walmart, and reselling them at 200-325 percent mark-ups and with exorbitant interest rates. One store near Fort Drum in upstate New York charged a U.S. Army soldier $6,000, including an inflated retail price and loan fees. The computer worth just $1,229. When he was unable to pay, the company started sending the soldier threatening messages on MySpace, according to a press release by the attorney general’s office.
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“This company took advantage of service members using deceptive practices and roping them into high interest contracts and ruining their credit ratings,” Schneiderman said in a prepared statement. “While fighting overseas, this is the last thing these soldiers needed to be worried about at home.”
Gabe Nugent, an attorney for SmartBuy, told the Wall Street Journal that the attorney general’s allegations “aren’t any more truthful or accurate than when they were first made two years ago.”
Schneiderman began his investigation after receiving a tip about a kiosk and small storefront near Fort Drum. His investigators found that SmartBuy salesmen aggressively pushed soldiers to buy overpriced computers, flat screen TVs and gaming systems on credit. The store refused to take cash. Instead, the salesmen pressured soldiers into signing payment contracts with high interest rates (10 – 25 percent) and hidden fees. The payment plans withdrew the money directly from soldiers’ pay, which is guaranteed by the U.S. government.
That led to serious problems for many soldiers. One paid a purchase price of $3,868.93 for an HP laptop commonly sold for $1,000. She tried to pay the loan off early to avoid extra interest, but SmartBuy’s financing company, Rome Financing, refused to let her.
Another soldier at Fort Drum bought a computer to stay in communication with his family and friends back home. He paid $3,446.92 for the computer, spread out in monthly payments of $126. When the computer broke after 13 months, he complained about the high price and lack of a warranty. SmartBuy offered him a new laptop, but only if he’d sign a waiver promising not to sue.
SmartBuy closed its storefront near Fort Drum in 2010, immediately after it learned of Schneiderman’s investigation. Under the company’s agreement with the state, it will release 995 soldiers from their payment contracts, foregoing $3.5 million in payments. The company may have to pay future penalties in the future, according to the attorney general’s statement.
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Christopher Maag Credit.com’s Reporter, Chris graduated with honors from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics. Reach Chris via email at chris (@) credit.com.