A retail chain that caters to the military has spent most of the second half of the year under scrutiny for sales and debt collection practices that steer very close to the limits of legality.
On Monday, WRAL-TV in Raleigh profiled USA Living–known until last month as USA Discounters–a chain of 24 stores in 12 states. Most of the stores are located in military towns, including one in Fayetteville near Fort Bragg. It promises that servicemembers are guaranteed credit for items such as electronics, furniture, jewelry, and appliances. That promise appealed to Army Staff Sgt. Chris Trill, who bought a sofa set, chair, TV and stand at USA Discounters’ Fayetteville store. Moreover, the payments would be taken out of his monthly allotment.
In hindsight, the contract terms contained a large red flag. The entire set would normally sell for $5,000. After finance charges and fees for debt cancellation and warranties, it ended up costing over $10,500. The real heartache began when Trill went on disability and lost his allotment. After deadlocking on refinancing terms, USA Discounters took him to court. However, under the terms of the contract, the suit was filed in Virginia–a convenience for the company, since it’s headquartered in Virginia Beach. This is possible due to a loophole in the Fair Debt Collection Practices Act that allows lenders suing on their own behalf to file suit in a remote court. After a 90-day delay (as provided by the Servicemembers Civil Relief Act), USA Discounters won a default judgment that allowed it to garnish his pay. He got some relief in August, when he was one of several servicemembers who got a refund for legal protection services to which they were legally entitled for free.
Trill is one of many servicemembers who have felt the squeeze from USA Discounters/USA Living over the years. WRAL’s story came on the heels of an investigation in July by ProPublica that revealed USA Discounters had sued 13,400 people since 2006–many of whom were in the military. According to data from the Pentagon, USA Discounters had garnished the pay of more active-duty servicemembers than any other company in the nation. Many of those cases involved personnel who couldn’t possibly come to Virginia for court. These and other practices have led to accusations that the company is taking advantage of people who have very little financial know-how. According to one former USA Discounters employee, the former owners stressed selling the financing program first and the merchandise second.
One soldier, Army Pvt. Jamie Mays, was deployed to Germany and Afghanistan before he could file for bankruptcy to discharge his debt on a laptop computer that had stopped working. USA Discounters won a judgment that froze his credit union account for several weeks. Another soldier, Army Spc. Angel Aguirre, found himself passed over for promotion after USA Discounters won a judgment against him for over $8,000. In response, two sets of U. S. Senators sent letters demanding that the Pentagon, the CFPB and the Federal Trade Commission investigate USA Discounters and similar retailers.
Apparently the pressure has had some effect. In October, the company’s new CEO, Jeff Feinberg, not only changed the company’s name, but claimed to have instituted a top-to-bottom reform in the way it does business–including debt collection procedures for military customers. For instance, customers can choose where any legal action can be filed if need be. Feinberg also personally called Trill and offered to cut his debt in half. However, in the two weeks immediately prior to the company’s rebranding as USA Living, it filed 28 suits in Virginia courts. Only one of the defendants had a Virginia address.
Feinberg’s reforms may not be enough to stave off further government scrutiny. In a letter to Senator Richard Blumenthal (D-Conn.), one of the Senators who wanted the FTC to investigate USA Discounters/USA Living, FTC chairwoman Edith Ramirez said that in the past, the FTC has ruled that there is at least one case where her colleagues have found that it is unfair for a lender to file suit in a remote court. Additionally, according to WRAL, North Carolina attorney general Roy Cooper is looking into USA Living. From the looks of it, this company needs to be held to account in some fashion, reformed or not.
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Darrell Lucus, also known as Christian Dem in NC on Daily Kos, is a radical-lefty Jesus-lover who has been blogging for change for a decade. Follow him on Twitter @DarrellLucus or connect with him on Facebook.
