The attorney general of New York has stepped in to provide $3.5 million in debt relief for victims of a scam run by a shopping mall kiosk that targeted soldiers.

Almost a thousand soldiers fell victim to a pricing and financing scam run by the ironically-named retailer SmartBuy, which Attorney General Eric Schneiderman said used a kiosk and a small storefront at the Salmon Run Mall near Fort Drum, N.Y., to rip off soldiers stationed at the base.

According to Schneiderman’s office, the company bought electronic equipment such as gaming systems, flat-screen televisions, and laptops from discount retailers like Costco, Walmart, and Sam’s Club. The company then marked up the merchandise by as much as 325 percent and aggressively sold the wildly-inflated electronic equipment to soldiers. However, the company refused to take cash payments and instead pressured buyers into payment contracts with hidden fees and extraordinarily high interest rates of between 10 percent and 25 percent. Over the life of the company’s payment contracts, total interest payments averaged 244 percent (“A.G. Schneiderman Secures Financial Relief for Hundreds of Debt-Ridden Soldiers,” Office of the Attorney General of New York press release, Aug. 16, 2011).

In one case, a soldier ended up $6,000 in debt for a computer that cost $1,200. In another case, a soldier who later served in Iraq bought a 47-inch LCD TV for $4,632 plus 12 percent interest when it cost only $1,100 at Sam’s Club.

“This company took advantage of service members using deceptive practices and roping them into high-interest contracts and ruining their credit ratings,” Schneiderman said. “The last thing any soldier should have on their mind is the fact they were the victim of a scam back home that haunts them when they are overseas. They’re easy victims for some types of scams.”

Kiosks in Eight States Were Allegedly Just Storefronts for Financing Companies

Under terms of the debt settlement agreement, bankrupt California-based Rome Finance Co. Inc., one of several financing companies associated with SmartBuy, will release 995 soldiers from $3,530,090.58 worth of financing contracts in the state of New York and will take steps to repair soldiers’ credit histories (“NY Attorney General Settles Soldiers’ $3.5M Debt,” The Wall Street Journal, Aug. 16, 2011).

Litigation against other associated financing companies, including Britlee Inc., Integrity Financial of North Carolina Inc., Rome Finance Co. LLC, and Frisco Marketing of N.Y. LLC — all of which are solvent and do business as SmartBuy and SmartBuy Computers and Electronics — is pending in New York State Supreme Court.

SmartBuy attorney Gabe Nugent said the allegations against the company are baseless, although he said the company, based in Fayetteville N.C., is in transition and no longer sells consumer goods.

Schneiderman’s office has referred over 200 cases to attorney’s generals in other states. In addition to New York, SmartBuy had operated near military posts in California, Colorado, Georgia, North Carolina, Oklahoma, Tennessee, and Texas.

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