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Retailer required to refund $350K to scammed servicemembers
WASHINGTON (8/15/14)--The Consumer Financial Protection Bureau (CFPB) has ordered an end to a company's tactics that are responsible for tricking thousands of servicemembers into paying fees and obtaining legal protections.

USA Discounters Ltd. will repay more than $350,000 in refunds and an additional $50,000 civil penalty for what CFPB Director Richard Cordray called a "scam that was designed to exploit unsuspecting servicemembers."

USA Discounters, based in Norfolk, Va., operates a chain of retail stores selling furniture, electronics, bedding and appliances. Most of the company's stores are located within a few miles of military bases, and USA Discounters uses standardized contracts tailored to members of the U.S. armed forces when dealing with active-duty servicemembers.

Active-duty servicemembers had to agree in a contract with USA Discounters to pay a $5 fee for a company called SCRA Specialists LLC to be represent their rights under the Servicemembers Civil Relief Act (SCRA).

The SCRA provides certain legal protections to active-duty servicemembers, including delaying debt collection lawsuits filed against a servicemember if the court finds that the servicemember's military duty requirements hinder his or her ability to defend himself or herself.

USA Discounters portrayed SCRA Specialists as an independent representative that would perform services characterized as a benefit to servicemembers. Instead, SCRA Specialists helped USA Discounters sue servicemembers and did not perform many of the services that were promised.

The retailer also misrepresented SCRA Specialists as an independent company working on servicemembers' behalf, when in fact SCRA Specialists' sole source of revenue was USA Discounters' customers. USA Discounters gave $4.50 of each $5 fee to SCRA Specialists. The fee was charged in more than 70,000 contracts and generated more than $350,000 since 2009.

According to a report from the investigative journalism website ProPublica, USA Discounters has filed 13,470 lawsuits against servicemembers since 2006.

The CFPB's enforcement action requires the retailer to end its marketing of such contracts to servicemembers and stop charging SCRA fees, in addition to the $350,000 in refunds and $50,000 penalty.

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