USA Discounters, a retail company that caters to service members, has agreed to refund $350,000 collected as part of what federal regulators termed a "fee scam.''
The company also agreed to pay a $50,000 penalty to settle an inquiry by the Consumer Financial Protection Bureau over a $5 fee charged to tens of thousands of customers.
USA Discounters was the focus of a ProPublica investigation last month. The story detailed how the company courts service members, guaranteeing them credit on high-priced appliances and electronics, then sues them in Virginia if they fall behind on their payments, regardless of where they made their purchases.
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, ProPublica reported.
The settlement announced yesterday doesn't affect any of the practices identified in our story. Instead, it focused on a $5 fee that USA Discounters charged its active-duty customers for supposed services that were not provided. According to the CFPB, the fee was charged in more than 70,000 contracts dating since 2009 — a striking indicator of just how many active-duty customers the company has.
As part of the settlement, USA Discounters will refund that $5 fee to its current and former customers. The company also agreed to stop charging the fee going forward. It did not admit to violating any law in the consent decree, which was made public yesterday.
The agreement explicitly does not preclude further action by the Bureau against the company relating to other issues.
Last week, a group of senators, citing ProPublica's story, sent letters to the Bureau urging it to launch an investigation of the company. They also called for the Bureau to close legal loopholes the company had exploited in filing its lawsuits.
In a statement, USA Discounters' Vice President Timothy Dorsey said the company had fully cooperated with the Bureau's inquiries about the fees, but he strongly objected to the Bureau's statement in its press release that the fees were a "scam." "The company made absolutely no profit, and in fact lost money, in connection with the fees in question," he said.
"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," he said.