Updated at: 11/12/2012 10:05 AM
By MARY ESCH
(AP) ALBANY, N.Y. - New York state Attorney General Eric Schneiderman has reached a $9.5 million settlement with retailer SmartBuy and its affiliated companies over debt fraud aimed at soldiers.
Schneiderman said Monday that SmartBuy operated from a kiosk and small storefront at Salmon Run Mall near the Fort Drum Army post and ruined the credit of thousands of soldiers through fraudulent charges. The settlement, along with an earlier one with SmartBuy, wipes out $12.9 million in debt for more than 4,000 soldiers nationwide.
Schneiderman said SmartBuy salespeople talked soldiers into payment contracts with hidden fees and exorbitant interest.
Fayetteville, N.C.-based SmartBuy closed its local operations after Schneiderman demanded it stop deceptive practices and reimburse soldiers.
Attorney general investigators found that SmartBuy purchased merchandise from stores like Sam’s Club, Costco and Walmart, marked it up 200 to 325 percent, and added interest of 10 to 25 percent. It locked soldiers into credit agreements with undisclosed fees and high interest, paid directly from military paychecks.
In one case, a soldier who bought a PlayStation 3 and 32-inch Vizio TV for $162 a month was never told the total cost would be $3,123 plus interest.
"SmartBuy took advantage of service members using deceptive practices and roping them into high interest contracts and ruining their credit," Schneiderman said. "I am proud that we were able to wipe out the debts of our men and women who stand up for us every day."
The settling entities include Frisco Marketing of N.Y., doing business as SmartBuy and SmartBuy Computers and Electronics; Integrity Financial of North Carolina; Britlee and GJS Management; all owned and/or operated by Fayetteville, N.C.-based family John Paul Jordan, Stuart Jordan and Rebecca Wirt.
"In this matter, the most important considerations for SmartBuy were to protect the credit histories of service members and their families, and ensure they received fair value for their product purchases. This settlement achieves both objectives," Attorney Gabe Nugent, who represents SmartBuy and its affiliates, said Monday.
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. They will also clear all negative credit reports related to the contracts and will pay a $150,000 penalty to the state.
Under a consent order and judgment signed by state Supreme Court Justice Hugh Gilbert in Jefferson County, the companies are banned permanently from doing business in New York.
(Copyright 2012 by The Associated Press. All Rights Reserved.)