USA Discounters must provide refunds to U.S. military troops to the tune of $350,000, after the Consumer Financial Protection Bureau put a stop to the retail chain's practice of targeting service members with a so-called "fee scam."
The CFPB announced Thursday that USA Discounters must also pay a $50,000 civil penalty:
CFPB Director Richard Cordray explained the scam:
“USA Discounters charged servicemembers for legal protections they were already entitled to, and for services that were never actually provided.
Targeting servicemembers with scams disguised as legal benefits is unconscionable, and we will not allow this injustice to continue.”
For troops whose loans are in collection, the $5 plus interest will be deducted from the debt. The restitution must be made within 90 days under the terms of the consent order.
In July, ProPublica published an article outlining its own investigation into a completely different business practice of USA Discounters. According to ProPublica, the retail chain automatically approves credit for members of the military, but then immediately sues them if they fall behind on their payments:
Since 2006, the company has filed more than 13,470 suits in two local Virginia courts. Once the company wins a lawsuit, it can move to seize the borrower's pay, and USA Discounters seizes the pay of more active-duty military than any company in the country...
In response to the action taken by the Consumer Financial Protection Bureau against his company, USA Discounters' Vice President Timothy Dorsey released a statement that read, in part:
"USA Discounters is proud of the company's 20 year plus history serving the military and we welcome the opportunity to address any questions or concerns from governing authorities about the company and, in particular, its relationship and dealings with those serving our country."
There are two USA Discounters stores in San Diego County. One is in Oceanside, near Camp Pendleton. The other is located in Chula Vista - a five mile drive from Naval Base San Diego.
