Fayetteville-based retailer SmartBuy has agreed to erase the debts of more than 4,000 customers in another state after that state’s attorney general sued over what described as deceptive credit practices. The customers included in the commercial litigation were all members of the Army. Government officials say that SmartBuy deceived the servicemembers by marking up the price on its electronic items and failing to disclose fees and high interest rates.
The servicemembers were stationed nationwide, though perhaps the largest single group of them was stationed at Fort Drum in New York, where the litigation was brought. SmartBuy operated a kiosk and store in a mall near the fort. The company sold high-ticket items like televisions and video game consoles and offered buyers the option of paying on credit.
But the company was defrauding customers by purchasing its goods from big-box stores, marking them up by 200 to 325 percent, and charging interest of up to 25 percent, the attorney general said. SmartBuy also charged fees that the soldiers may not have been aware of, since the monthly payments were often deducted directly from their paychecks. For example, one soldier purchased a TV and PlayStation 3 was not told the total cost of his purchase would end up being $3,123 plus interest.
The 4,321 soldiers involved in the nationwide settlement said their credit ratings were ruined after they were unable to meet the high monthly payments. The settlement wipes out their total of $12.9 million in debts to SmartBuy. Besides that, the North Carolina company will erase all negative credit reports it sent out against the soldiers, pay a $150,000 fine to the State of New York and never do business in that state again.
Source: The Kansas City Star, “NY gets $9.5M from NC firm over soldier debt fraud,” Mary Esch, Nov. 12, 2012