SmartBuy, a retailer and
financing firm based in North Carolina, has signed a $9.5 million agreement
with the New York Attorney General’s Office to settle charges the company
fraudulently charged thousands of soldiers who purchased electronics near Fort
Drum in New York and ruined their credit.
The settlement will clear
debt fraudulently charged to hundreds of New York soldiers at a shopping mall
near Fort Drum and thousands of soldiers nationwide. This is the second
settlement the attorney general has reached with SmartBuy and its affiliated
companies.
"SmartBuy took
advantage of service members using deceptive practices, roping them into high
interest contracts, and ruining their credit,” Attorney General Eric T.
Schneiderman said in a statement.
The investigation
The settlement is the result
of the agency’s investigation of a kiosk and small storefront at the Salmon Run
Mall that appeared to be marketing specifically to Fort Drum soldiers. Sales
clerks aggressively pushed the sales of electronic equipment, including laptops,
gaming systems, and flat screen televisions to soldiers, Schneiderman said.
At the time of the sales,
SmartBuy sales representatives refused to take cash payments for merchandise
and instead pressured soldiers to enter into payment contracts with hidden fees
and exorbitant interest rates, he said.
The state’s investigation
revealed that the practices at SmartBuy's Salmon Run Mall location were part of
a larger scheme to defraud service members by deceptively reselling them
computers and electronics at wildly inflated prices. The soldiers were then
locked into revolving credit agreements with undisclosed fees and high interest
rates paid directly from military paychecks to unlicensed lenders.
SmartBuy purchased
merchandise from stores such as Sam's Club, Costco, and Walmart. The items were
then marked up by 200 to 325 percent, and included an added interest of 10 to 25
percent. The interest rates averaged out at 244 percent.
SmartBuy closed its local
operations after the agency demanded that it stop its deceptive business
practices and reimburse defrauded soldiers. A lawsuit was filed in 2010
and litigation continues against Rome Finance LLC and two individuals, Ron
Wilson, of California, and William Collins, of Georgia.
The settlement
The settling parties include
Frisco Marketing of N.Y. LLC, doing business as SmartBuy and SmartBuy Computers
and Electronics; Integrity Financial of North Carolina Inc.; Britlee Inc.; and
GJS Management Inc.; all owned and/or operated by Fayetteville, N.C.-based
family John Paul Jordan, Stuart Jordan, and Rebecca Wirt.
According to the terms of
today’s settlement, the settling companies will release about 358 New York state
soldiers and an additional 3,963 soldiers nationwide from their debt. The
defendants will also clear all negative credit reports related to the contracts
and will pay a $150,000 penalty to the state.
The settling companies are
banned from doing business in New York.
