CFPB Fines USA Discounters

September 28, 2014

USA Discounters, a business that targets service members, has been fined $400,000 by the CFPB for misleading its customers. The CFPB’s action comes less than two months after a joint Washington Post/ Pro Publica report detailed USA Discounters’ collection practices.

The CFPB’s action, described in its press release, concerned USA Discounters’ practice of charging active duty service members a $5 fee to receive protections to which they are already entitled under the Servicemembers Civil Relief Act (SCRA). As described in the Consent Order, fee related to a service supposed to be provided by “SCRA Specialists, LLC”.

The services that “SCRA Specialists, LLC” was supposed to provide included: (a) acting as the service member’s “representative” able to receive notices require by SCRA regarding the contract with USA Discounters; (b) receiving from the service member written notification of any change of address (which SCRA Specialists would then forward to USA Discounters); and (c) obtaining verification of the service members’ active status. The problem is that USA Discounters never sent any notices to SCRA Specialists, SCRA Specialists never performed any “representation” of service members and USA Discounters never performed active duty status checks through SCRA Specialists. The services for the fee were, as the CFPB says, illusory.

As a result of the consent order, USA Discounters will have to refund $350,000 to customers, pay $50,000 in civil fines and stop charging the bogus fee.

Important though this action is, it does not touch on USA Discounters abuse of the SCRA in collection actions against active duty service members, described in the Washington Post:

Should customers fall behind, the company transforms into an efficient collection operation. And this part of its business takes place not where customers bought their appliances, but in two local courthouses just a short drive from the Company’s Virginia Beach headquarters.

From there, USA Discounters files lawsuits against service members based anywhere in the world

The company justified suing active duty military stationed overseas in Virginia courts, by the fact that, buried elsewhere in USA Discounters contracts, are terms allowing the company to sue service members Virginia. When the services members don’t show up for court, USA Discounters ask for a default judgment.