SmartBuy, a retailer and financing firm based in North Carolina, will pay $9.5 million to settle charges that the company fraudulently charged thousands of soldiers who purchased electronics near Fort Drum and ruined their credit.
The New York Attorney General’s 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, wiping out a total of $12.9 million in debt for service members.
“SmartBuy took advantage of service members using deceptive practices, roping them into high interest contracts and ruining their credit,” Schneiderman said. “These actions are nothing short of unconscionable. I am proud that we were able to wipe out the debts of thousands of men and women who stand up for us every day. While protecting our values overseas, this is the last thing these soldiers needed to be worried about at home.”
The Attorney General’s office launched an 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.
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.
The 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 and locking the soldiers into revolving credit agreements with undisclosed fees and very high interest rates 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 200-325 percent, and included an added interest of 10-25 percent.
The interest rates averaged out at 244 percent.
SmartBuy abruptly closed its local operations after the Attorney General demanded that it cease its deceptive business practices and reimburse defrauded soldiers.
Under the settlement, the companies will contractually release all of the approximately 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.