Home > Credit Score > AG: Soldiers’ Credit Destroyed in Overpriced Computer Scam

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A financing company for a chain of electronics stores that pushed costly loans for overpriced electronic gear on American soldiers will have to pony up $3.5 million and take steps necessary to restore soldiers’ rightful credit standing, thanks to a settlement announced this week by New York Attorney General Eric Schneiderman.

The California-based company, Rome Finance Co., Inc., is one of several finance companies involved in litigation with the attorney general; each company worked in connection with retailer SmartBuy, which is also being sued for the fraud operation targeting service members.

SmartBuy, which operated retail stores close to at least eight military bases across the country, stands accused of buying computers and electronics from major retailers like Sam’s Club and Walmart, and reselling them at 200-325 percent mark-ups and with exorbitant interest rates. One store near Fort Drum in upstate New York charged a U.S. Army soldier $6,000, including an inflated retail price and loan fees. The computer worth just $1,229. When he was unable to pay, the company started sending the soldier threatening messages on MySpace, according to a press release by the attorney general’s office.

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“This company took advantage of service members using deceptive practices and roping them into high interest contracts and ruining their credit ratings,” Schneiderman said in a prepared statement. “While fighting overseas, this is the last thing these soldiers needed to be worried about at home.”

Gabe Nugent, an attorney for SmartBuy, told the Wall Street Journal that the attorney general’s allegations “aren’t any more truthful or accurate than when they were first made two years ago.”

Schneiderman began his investigation after receiving a tip about a kiosk and small storefront near Fort Drum. His investigators found that SmartBuy salesmen aggressively pushed soldiers to buy overpriced computers, flat screen TVs and gaming systems on credit. The store refused to take cash. Instead, the salesmen pressured soldiers into signing payment contracts with high interest rates (10 – 25 percent) and hidden fees. The payment plans withdrew the money directly from soldiers’ pay, which is guaranteed by the U.S. government.

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That led to serious problems for many soldiers. One paid a purchase price of $3,868.93 for an HP laptop commonly sold for $1,000. She tried to pay the loan off early to avoid extra interest, but SmartBuy’s financing company, Rome Financing, refused to let her.

Another soldier at Fort Drum bought a computer to stay in communication with his family and friends back home. He paid $3,446.92 for the computer, spread out in monthly payments of $126. When the computer broke after 13 months, he complained about the high price and lack of a warranty. SmartBuy offered him a new laptop, but only if he’d sign a waiver promising not to sue.

SmartBuy closed its storefront near Fort Drum in 2010, immediately after it learned of Schneiderman’s investigation. Under the company’s agreement with the state, it will release 995 soldiers from their payment contracts, foregoing $3.5 million in payments. The company may have to pay future penalties in the future, according to the attorney general’s statement.

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Image: The U.S. Army, via Flickr.com

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  • Samuel Peterson

    I was pulled in just like this when I was in tech school. It was Valentine’s Day and my wife wanted a computer. So we went to the mall in Wichita Falls, TX and saw a store that had “financing for all military members.” Long story short because I had no credit built up this is the route I had to take to get a laptop for her. I ended up paying $2,500 for a computer, I found out later, was only really worth about $700; I had payments of $141 a month. Just recently I went to find the company’s info to see how much I still owed and couldn’t find them. Their store had been replaced by the same type of store with a new name and new customer records (kept by a “fanancial company” with a 1800 number out of China). That didn’t make me happy at all.

    After calculating it, I saw that I had fulfilled the payment, so I stopped the allotment to them. (If you don’t stop the allotment yourself they keep getting paid even after your debt is fullfilled, they won’t call or anything to tell you you’re finished paying).

  • John Nichols

    Hell, not just Smartbuy, you might want to look into Freedom Furniture.

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  • T. Whitebeck

    Any service member who’s even contemplating making a large purchase (computer, furniture, etc.) should first check in with their local military-oriented charitable organization (Army-Air Force Relief, Navy-Marine Corps Relief, and the Coast Guard equivalent) for free budget counseling and learning how to avoid these types of scams. The relief societies are not just for those who’ve already been ensnared in high-interest loans for overpriced goods; if they help prevent a service member from torpedoing a solid credit rating, then they will have fulfilled their mission. Don’t wait; contact your relief society today.

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