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 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 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.