Retailer That Overcharged, Sued Servicemembers Makes Deal To Settle State Lawsuit

USA Discounters, the not-at-all discount retailer that went bankrupt last year amid accusations of running a financing scam on customers, is looking to close at least one state investigations with a proposal that would provide a bit of relief to some customers sued by USA Discounters.

Not so long ago, USA Discounters was a largely unknown chain of retail stores — many located near military and naval bases — that was using fuzzy math and misleading marketing to convince people into paying many times the retail price under the guise of “financing,” then suing customers for lack of payment, knowing they would likely be unable to defend themselves.

Regardless of where the customer was living, USA Discounters almost always filed non-payment lawsuits in Virginia, requiring defendants to travel hundreds, possibly thousands, of miles if they hoped to defend themselves. With many defendants either unable to make the trip, USA Discounters would be granted default judgments.

After the Consumer Financial Protection Bureau caught USA Discounters illegally charging fees to servicemembers, resulting in $350,000 in refunds, the company tried to change its name and image, but it was all too late. By the fall of 2015, USA Discounters had declared bankruptcy.

In July 2015, shortly before the retailer filed for Chapter 11 bankruptcy protection, Colorado Attorney General Cynthia Coffman sued USA Discounters, accusing the company of — among other things — violating Colorado law by filing non-payment lawsuits against customers in Virginia instead of Colorado.

While the bankruptcy filing put a hold on the Colorado AG’s lawsuit, Coffman’s office filed a $15.6 million claim with the Delaware-based federal bankruptcy court.

In court filings this week [PDF; PDF], the bankrupt retailer revealed that it has reached a deal with Colorado that, if approved, would end the litigation and provide some relief to sued shoppers.

According to the proposed settlement, which would allow USA Discounters to avoid admitting it did anything wrong, the company would pay a $1 million penalty. Additionally, for Colorado customers who were sued by the retailer, the price tag of any judgment against them would be reduced by 60%.

Closing the book on the Colorado lawsuit doesn’t spell the end of legal troubles for USA Discounters. More than half the states are currently looking into the bankrupt retailer’s business practices.

[via WSJ.com]