In 2014, ProPublica published an investigation of USA Discounters, a subprime lender that, contrary to its name, specialized in enticing military service members into overpaying for furniture, electronics and appliances. When they fell behind on the high-interest loans, the company often took them to court in Virginia — a few miles from the company’s headquarters, but often nowhere near where the service members were based. With court judgments in hand, the company gained the power to seize money from soldiers’ paychecks or bank accounts.
Since our story ran, USA Discounters has gone out of business and declared bankruptcy, but still has faced legal challenges over its practices. This summer the company settled with the attorney general of Colorado over a suit filed last year.
The state’s suit focused on the company’s collection techniques, but it also alleged that USA Discounters had charged interest rates above what is allowed in Colorado. The deal involves a penalty of $1 million and breaks for thousands of customers on outstanding debt. Although the company has shut down its stores, it continues to collect on outstanding loans.
As part of the deal, USA Discounters did not admit or deny wrongdoing. The company disclosed in a filing in its bankruptcy case that other regulatory investigations are ongoing.
In addition to settling with USA Discounters, Colorado’s attorney general also settled a separate suit with two other retailers, Freedom Furniture and Electronics and Military Credit Services. These businesses, owned by a pair of brothers, used practices similar to those of USA Discounters. As we reported in 2014, these three companies had filed more than 35,000 collection suits in Virginia courts since 2006. And like USA Discounters, Freedom has also been hit with other investigations: In late 2014, Freedom settled similar lawsuits brought by two other states and the federal Consumer Financial Protection Bureau. It closed its stores last year.
Colorado’s attorney general said that, together, the settlements with USA Discounters and Freedom would net $3.9 million in redress for harmed consumers. Freedom also did not admit wrongdoing as part of the settlement with Colorado.
