SAN DIEGO -- Attorney General Kamala D. Harris, along with the attorneys general of 49 other states and the District of Columbia, today announced a $95.9 million settlement with USA Discounters over allegations that the company used deceptive marketing and unlawful debt collection practices targeting military servicemembers. Under the settlement, Attorney General Harris secured nearly $7 million in restitution for over 4,100 Californians who were harmed by the company’s fraudulent actions.
USA Discounters, which also did business as USA Living and Fletcher’s Jewelers, operated retail stores near military installations, including near Navy and Marine Corps installations in the San Diego Area. It sold consumer products, including furniture, appliances, televisions, computers, smartphones, and jewelry, primarily on credit and specifically targeted members of the military and veterans. The company marketed itself as a discount retailer but actually sold its merchandise at a substantial mark-up, including additional fees that effectively concealed exorbitantly high interest rates for financed purchases.
“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,” said Attorney General Harris. “This agreement holds USA Discounters accountable for its illegal conduct and compensates servicemembers and veterans for the harm it caused.”
USA Discounters advertised that military, veterans and government employees would never be denied credit for goods purchased from the retailer and then used abusive tactics to collect on debts owed, such as persistently contacting servicemembers’ chains-of-command and using the military allotment system to guarantee payment. The company’s abusive actions threatened the military careers and security clearances of its victims.
In addition to its deceptive marketing, USA Discounters also failed to provide terms and disclosures in its financing agreements, as required under the law, and misled consumers about the costs of financing. USA Discounters also charged added fees to its customers who were on active duty and required them to sign contracts that included unfavorable terms not included in contracts signed by other customers, in violation of California’s Military and Veterans Code, which prohibits discrimination against military members in the terms and conditions of credit. For contracts entered into outside of California, USA Discounters filed default debt collection actions against servicemembers in Virginia state courts, regardless of the state where the contract was entered into or the servicemember’s location, which meant servicemembers were often unable to defend themselves in court.
USA Discounters closed its stores in the summer of 2015 before declaring bankruptcy. Under the terms of this settlement, the company agreed to write off accounts, remove negative information from credit reports, and provide other consumer relief. The settlement also includes provisions for injunctive relief and civil penalties.
The Attorney General’s Office received critical assistance in its investigation from the Navy and Marine Corps legal assistance offices at Navy Base San Diego, the Marine Corps Recruit Depot, and Camp Pendleton, and from the Navy’s Fleet and Family Support Center.
Attorney General Harris has defended the rights of servicemembers, filed actions against companies who prey on members of the military, and issued multiple consumer alerts to warn servicemembers against scams and fraud. In August 2016, Attorney General Harris reached a $252,000 settlement with two privatized military housing contractors, Lincoln Military Property Management LP and San Diego Family Housing LLC and their eviction law firm, Kimball, Tirey & St. John LLP, over the companies’ unlawful evictions of 18 military servicemembers and their families in San Diego and Orange County. In addition, Attorney General Harris previously took action against JP Morgan Chase for violating the Servicemembers Civil Relief Act in obtaining default judgments against servicemembers on credit card debt.
The Attorney General also obtained a $1.1 billion judgment against Corinthian Colleges, which illegally used the official seals of the military services in advertisements to entice servicemembers and veterans to enroll in its programs.