Harris Jewelry, a national retail chain, has agreed to settle charges brought by the Federal Trade Commission (FTC) and officials from 18 states. Regulators claimed that the company used deceptive sales tactics against U.S. active-duty service personnel.
Under the terms of the settlement, the company will pay $1 million to the 18 states and provide $34 million in compensation to affected consumers.
The complaint accused Harris Jewelry of deceptively marketing overpriced, poor-quality jewelry to members of the armed forces and including “protection plans” in the price without disclosing it.
According to the FTC, the company falsely told customers that financing jewelry purchases through Harris would raise servicemembers’ credit scores. As part of the settlement, the company agreed to stop collecting $21 million in outstanding debt.
Violation of the Military Lending Act
The complaint also includes a charge that the jewelry company violated the Military Lending Act (MLA), the first time the FTC has taken action under that law. Under the MLA, interest rates charged to military personnel are capped at 36% APR.
“Today’s action against Harris Jewelry shows that companies that target our country’s service members with false promises and deceptive sales practices will face serious consequences,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection.
New York Attorney General Letitia James led the 18 states’ investigation and called the company’s marketing efforts “abhorrent.” She said the Hauppauge, N.Y.-based company purposely located its retail stores near military bases.
“Harris Jewelry claimed to serve and support our troops, but its business practices were entirely self-serving,” James said. “For years, Harris Jewelry misled military members and saddled them with thousands of dollars of debt.”
James also said the company charged as much as $349 for a protection plan for its merchandise but did not disclose the charge to the buyer. She said she received complaints about stones falling out of their settings, chains breaking, and the finish on the jewelry fading.
‘Operation Teddy Bear’
James led a multi-state investigation that found servicemembers were enticed into retail stores through a marketing scheme dubbed “Operation Teddy Bear.” The scheme allegedly involved advertising teddy bears in military uniforms while promising charitable donations.
The investigation discovered there was no legal contract between the company and Operation Troop Aid, Inc., which Harris supposedly claimed to support. James said consumers were often given varying and conflicting information about the amount donated to the charity.
Under the consent order, Harris Jewelry will contact consumers entitled to refunds for the protection plans and must also post a notice on its website about the availability of refunds. Consumers who have specific questions about obtaining redress may contact the New York State Attorney General’s Office at (315) 523-6080.