(WBNG Binghamton) New York Attorney General Eric T. Schneiderman on Monday announced that his office has secured a $9.5 million settlement with SmartBuy, a retailer and financing firm based in North Carolina after the company fraudulently charged thousands of soldiers who purchased electronics near Fort Drum and ruined their credit.
According to a news release from Schneiderman's office:
The Attorney General’s 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, wiping out a total of $12.9 million in debt for service members.
"SmartBuy took advantage of service members using deceptive practices, roping them into high interest contracts and ruining their credit. These actions are nothing short of unconscionable. I am proud that we were able to wipe out the debts of thousands of men and women who stand up for us every day," said Attorney General Schneiderman. "While protecting our values overseas, this is the last thing these soldiers needed to be worried about at home."
The litigation is the result of the Attorney General's office 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. 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.
The 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 and locking the soldiers into revolving credit agreements with undisclosed fees and very high interest rates paid directly from military paychecks to unlicensed lenders. SmartBuy purchased merchandise from stores like Sam's Club, Costco and Walmart. The items were then marked up by 200-325 percent, and included an added interest of 10-25 percent. The interest rates averaged out at 244 percent.
SmartBuy abruptly closed its local operations after the Attorney General demanded that it cease its deceptive business practices and reimburse defrauded soldiers. The Attorney General's office commenced a lawsuit against all involved parties in 2010. Litigation continues in New York State Supreme Court in Jefferson County against Rome Finance LLC and two individuals, Ron Wilson, of California, and William Collins, of Georgia. The settling entities 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 contractually release all of the approximately 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 total value of this second resolution is $9,562,234.10, and represents a significant step forward in this litigation.
To date, Attorney General Schneiderman has eliminated in excess of $12.9 million dollars of fraudulent debt for service members as a result of this continuing litigation. The total includes the first settlement reach last year which cleared $3.5 million in debt for service personnel.
The investigation revealed that thousands of soldiers fell victim to SmartBuy's actions, including:
• A US Army soldier who purchased a Playstation 3 and a 32" Sony Vizio TV for $162 a month. He was never told the total cost would be $3,123.67, plus interest. He couldn't reach anyone to discuss the pricing issue and as of August 2012 still owed $2,601.48.
• A US Army soldier who purchased a 47" vizio LCD TV, HP Laptop, and Lojack for $7,378.72 was told his monthly payments would be $319. He returned in January 2010 to purchase a 32" Vizio TV, PS3 and five games for an additional $3,769.10, with monthly payments costing $196. He was not advised of the interest rate and as of August of 2012 he still owed more than $3,117.34.
• A US Army Soldier purchased a Casio Camera, iTouch 8 GB, iPod 160 GB, and a PSP GO 16 GB from SmartBuy. He was told he was "getting a deal" for the items at a monthly cost of $150, but was never informed of the cost of each item or the interest rate he would be charged.
Under the consent order and judgment signed by State Supreme Court Justice Hugh Gilbert in Jefferson County, the settling companies are banned for good from doing business in New York.