New York Attorney General Eric T. Schneiderman has secured a $3.5 million settlement with a financing company that will result in hundreds of soldiers being relieved of their financial debt.
Rome Finance Co., Inc., of California operated as the financing company for SmartBuy, a storefront electronics retailer. Through its Bankruptcy Trustee, Rome Finance has agreed to relieve soldiers of their debt with that company and take the necessary steps to restore the credit history of hundreds of them.
The Attorney General's office is engaged in ongoing litigation with the main retailer, SmartBuy and a number of its other finance companies.
"This company took advantage of service members using deceptive practices and roping them into high interest contracts and ruining their credit ratings," said Schneiderman. "While fighting overseas, this is the last thing these soldiers needed to be worried about at home."
Last year, the Attorney General's office began investigating a kiosk and small storefront at the Salmon Run Mall, near Fort Drum, when it appeared to be marketing specifically to soldiers.
Sales clerks would aggressively push the sales of electronic equipment such as laptops, gaming systems and flat screen televisions to soldiers. At the time of the sale, SmartBuy sales representatives would not take cash payments for the merchandise and instead pressured soldiers to enter into payment contracts with hidden fees and exorbitant interest rates.
A larger scheme
The investigation revealed that the SmartBuy's Salmon Run Mall Kiosk was 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--all 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 to 325 percent, then included an added interest of 10-25 percent. The interest rates averaged out at 244 percent.
The storefront, SmartBuy, abruptly ceased local operations in 2010 upon learning of the Attorney General's demands that it cease its deceptive business practices and reimburse defrauded soldiers. The Attorney General's office commenced suit against all involved parties in April 2010.
Litigation is currently underway in New York State Supreme Court in Jefferson County against the remaining solvent companies. The five affiliated 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.; GJS Management, Inc.; and Rome Finance Co. LLC, all owned and/or operated by Fayetteville, N.C.-based John Paul Jordan, Stuart Jordan and Rebecca Wirt, and Concord, California-based William Collins and Ronald Wilson.
According to the terms of the Attorney General's settlement, Rome Finance Co., Inc., the first financing company to settle, will release approximately 995 soldiers who entered into contracts in the state of New York, or who sought protection in New York State. The value of this first resolution with the bankrupt defendant is $3,530,090.58 of relieved debt, and represents a significant step forward in this litigation.
The investigation revealed that hundredsof soldiers fell victim to SmartBuy's actions, including:
- A US Army soldier who purchased an HP 6433 laptop in August 2007 - She was told the price would be $3,868.93. She later found the exact same computer for $1,000.00. Rome Financing would not allow her to pay off her balance early to avoid paying additional interest.
- A US Army soldier who purchased a Sony FS520 laptop in May 2005 -His base price was $3,208.93 not including 19.2% interest. This laptop regularly retails for approximately $1,229.99. He currently owes over $6,000.00 due to Rome Financing. In June 2010, he started receiving messages on his MySpace account from a collection agent at Rome Finance.
- A recently enlisted soldier purchased a computer to stay in touch with friends and family back home. He signed a contract to pay $126 a month plus fees. The loan turned out to be $3,446.92, plus additional undisclosed fees. The computer broke after 13 months. When he complained about the high price and no warranty, he was offered a new laptop but only if he'd sign a waiver promising he would not take legal action. He declined.