$1,009,000 Restitution for AZ Military Service Members Defrauded

PHOENIX - Arizona Attorney General Mark Brnovich along with 49 other State Attorneys General announce a settlement with USA Discounters, a company accused of defrauding military service members all across the country.

Under the settlement, Virginia-based USA Discounters will pay $95.9 million in restitution, primarily benefiting active and veteran service members. The settlement will impact approximately 400 Arizonans who will receive $1,009,000 in restitution.

USA Discounters, also doing business as USA Living and Fletcher’s Jewelers, sold furniture, appliances, televisions, computers, smart phones, jewelry, and other consumer goods principally on credit. USA Discounters typically marketed to members of the military and veterans, advertising that military, veterans, and government employees would never be denied credit for goods purchased from the retailer. There were 24 stores located across the country. There were not any stores in Arizona, however some service members eligible for restitution have since moved to Arizona.

The Attorneys General alleged that USA Discounters engaged in unfair, abusive, false and deceptive acts and practices. These allegations involve engaging in abusive tactics while collecting on consumer debts, constantly contacting service members’ supervisors causing some service members to lose security clearances and face demotions.

In addition, the states alleged USA Discounters sold overpriced household goods at high interest rates, often using the military allotment system to guarantee payment. These unlawful business practices were allegedly secured through misrepresentations and omissions in advertising during the loan’s origination and during the collection process.

USA Discounters closed its stores in the summer of 2015 before later declaring bankruptcy.

Under the settlement, USA Discounters agreed to:

  • Write off all accounts with balances for customers whose last contract was dated June 1, 2012 or earlier, and correct the negative comment from the company on those consumers’ credit reports (Approximately $71 million);
  • Apply a $100 credit to all accounts whose contracts were dated after June 1, 2012, which were not discharged in bankruptcy, and correct the negative comment from the company on those consumers’ credit reports (Approximately $2.89 million);
  • Write off all judgments not obtained in the correct state, and correct the negative comment from the company on those consumers’ credit reports (Approximately $21.2 million);
  • Credit all judgments that were obtained in the correct state against members of the military with a credit equal to 50 percent of the original judgment amount (Approximately $728,000);
  • Pay a penalty of $40 million to the states. This $40 million penalty will be subordinated to all secured, administrative, priority, and unsecured claims that are allowed in the bankruptcy case.

The settlement agreement was approved by the U.S. Bankruptcy Court in the District of Delaware on September 29, 2016.

Full copy of the Settlement.