USA Discounters: Where A $650 Laptop Ends Up Costing Army Private $8,626

The USA Discounters website advertises its financing for military servicemembers and government employees.

A discount retailer that sells itself as being friendly to military borrowers has been pushed into the spotlight, thanks to a report highlighting questionable lending and marketing tactics that lead some borrowers into lawsuits where they can’t reasonably defend themselves.

A story published jointly by ProPublica and the Washington Post looks at the practices of a company called USA Discounters, a company that markets its financing plans to servicemembers and has locations near 11 of the nation’s largest military bases.

The retailer advertises its always-approved credit offers to members of the military with bad credit or no credit history.

And yet, the prices on things at the store are not very good. For example, the US Discounters website currently lists a Samsung UN60FH6003F 60″ TV as a “special” that “starts” at twice-monthly payments of $47 for 24 months. So $94/month for two years equals $2,256. Meanwhile, you can get that same TV on Amazon for $960.

ProPublica found an iPad Mini, which Apple sells for $329, going for more than double that amount, $699, at the retailer.

“You’re not selling the furniture. You’re not selling the appliances,” explains one former sales employee to ProPublica. “You’re selling our financing program.”

What he really means is that the store is apparently taking advantage of the fact that some people with little to no credit aren’t experienced or knowledgeable about interest rates.

$94/month for two years might seem like a good deal for the TV, but if you put the purchase on a high-interest credit card (20% APR) and made those same monthly payments, you’d be done with payments in only 12 months.

The USA Discounters deal is like making the Amazon purchase with a credit card that charges around 98% interest.

And this is without add-on fees that USA Discounters employees tell ProPublica they are encouraged to include in contracts.

For example, there is the Army Private who thought he would finance a Toshiba laptop through the retailer.

The laptop he bought could have been purchased elsewhere for around $650, reports ProPublica. But according to his contract, the price charged by USA Discounters was $1,799.

Then there was a $191.56 warranty fee… and $17.57 in “credit life insurance”… and $248.22 in “credit property insurance.” Throw in taxes and another $16 for filing and “specialist fees” — and let’s not forget the finance charge of $561.47 — the total comes out to $2993.22, to be paid out over the course of 23 payments of $130.14.

Again, had he been able to pay for this with a 20% APR credit card and made those same payments, he’d have paid for the $650 laptop in six months. Better yet, if he’d just saved the $130/month for five months, he could have purchased it outright without any credit.

But the private fell behind on the payments, and USA Discounters filed suit — in Virginia, more than 1,500 miles away from where the private now lives.

Unable to make the trip to Virginia for the court date, the company won a judgement of $8,626 against him.

And he’s not unique. ProPublica reports that USA Discounters has filed more than 13,470 lawsuits since 2006 and that the company almost always wins in court.

Some accuse the company of taking advantage of a loophole in the Servicemembers Civil Relief Act (SCRA), which gives active duty servicemembers the right to defend themselves but does not specify where lawsuits must be filed.

That could explain why, with so many servicemembers strewn about the globe, USA Discounters has a tendency to file its complaints in the same two courts in Virginia.

“This looks like somebody who has really, really researched the best way to get around the entire intent of the SCRA,” one retired Air Force judge advocate and expert on the SCRA tells ProPublica.

Additionally, while the SCRA says that there must be a court-appointed attorney to represent servicemembers who aren’t there to represent themselves, Virginia courts allow the creditor to suggest which attorney should be appointed.

ProPublica looked at 11 different cases and found that USA Discounters requested the same lawyer in each case involving servicemembers.

That lawyer says he represents “in the range of 300-400″ servicemembers each year, but as he explains in his all-caps letters to those clients, “I have not been appointed by the court to defend you on the merits of this case in any way. Mu only obligation is to review your response and request an additional stay or continuance if I feel it is appropriate given your answers.”

USA Discounters denies any business relationship with this attorney and says it’s just trying to save its customers money by filing in a state that doesn’t require it to use lawyers to file. The retailer say it’s passing on that savings to its customers (though anyone who read the earlier part of this story might wonder how much the retailer would charge if it had to pay lawyers).

Much like college students are targets of predatory for-profit colleges that talk them into taking out huge student loans without regard to their ability to repay that money, some say that “military-friendly” stores like USA Discounters go after servicemembers because they can easily seize a defendant’s wages.

According to ProPublica, USA Discounters seizes the pay of more active-duty military members than any company in the country.

Over the weekend, USA Discounters issued a statement defending its business practices, saying that it is “transparent about its policies. Prices and terms are clearly marked and described so customers can make informed decisions about whether a purchase is right for them. The company also performs an exhaustive analysis of every credit application and only extends credit in amounts customers can handle.”

The only factual issue with which the store’s statement takes issue is the claim that it always sues customers in Virginia.

“If the consumer wishes instead to have the matter heard outside of Virginia, USA Discounters honors that request,” reads the statement.

In his response to this claim, ProPublica’s Paul Kiel writes, “The contract language does not state this option. I specifically asked if the company advised borrowers of this option and to provide an example of such a case. Both questions were not answered.”