Madigan announces $96 million settlement with USA Discounters
Illinois Attorney General Lisa Madigan, along with 49 other attorneys general, announced on Oct. 3, a settlement with national retailer USA Discounters Ltd., over claims the company targeted and misled U.S. service members into expensive financing for overpriced consumer goods.
Illinois consumers are expected to receive more than $1.3 million in restitution through financing credits and loan wipe-outs, primarily benefiting more than 500 active Illinois service members and veterans.
The settlement stems from a multi-state investigation of the now-bankrupt USA Discounters, which also operated as USA Living and Fletcher’s Jewelers.
At one point the company operated 24 stores nationwide, which were mostly located just outside of military bases, and sold consumer products like furniture, appliances, televisions, computers, smart phones and jewelry principally on credit.
The products, also available online, were marketed to U.S. service members and veterans, guaranteeing credit for items that often sold for two to three times the typical retail price.
“This company exploited military service members with their predatory pricing and credit scheme,” Madigan said in a news release.
“This settlement will pay back money to the members of our military who shouldn’t have had to pay these exorbitant amounts in the first place.”
Madigan and the other attorneys general alleged that USA Discounters engaged in unfair, abusive, false and deceptive acts and practices in its advertising, loan origination and collection processes.
Madigan and the other attorneys general alleged USA Discounters sold overpriced household goods at high interest rates, often using the military allotment system, which automatically distributes money from an active-duty service member’s pay under certain conditions, to guarantee payment.
In some cases, company representatives persistently contacted service members’ chains-of-command in an attempt to collect on outstanding debts, which caused some service members to lose security clearances and face demotions in the military.
In addition, the multi-state investigation found that if borrowers fell behind on their loans, USA Discounters sued them in a select few Virginia jurisdictions, no matter the service member’s location, deployment status or residence.
This made it difficult for most service members to travel to defend themselves in court, if they were stationed at an out-of-state military base or overseas.
Under the settlement, USA Discounters must provide relief to former and current customers totaling approximately $95.9 million.
USA Discounters will send notice via email or U.S. mail to impacted consumers. Specifically, 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, which in total is valued at $71 million in relief.
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, which together amounts to $2.89 million in relief.
Write off all judgments not obtained in the correct state, and correct the negative comment from the company on those consumers’ credit reports that will both provide a total of $21.2 million in relief.
Provide credit equal to 50 percent of the original judgment amount for all judgments that were obtained in the correct state against members of the military for $728,000 in relief.
Pay a penalty of $40 million to the states for all secured, administrative, priority and unsecured claims that are allowed in the bankruptcy case.
For more information about the settlement or Madigan’s Military and Veterans’ Rights Bureau, please contact the Military and Veterans’ Rights Hotline at 1-800-382-3000.
Chicago Bureau Chief Grant Swinger is handling the case for Madigan’s Military and Veterans’ Rights Bureau.