Victims of pricey lending targeting military win settlement
07/29/2014 6:48 PM
07/29/2014 7:02 PM
At first glance, the loans advertised by Rome Finance looked like a good deal for service members who wanted to buy new video game consoles, laptops or flat-screen TVs but didn’t have the cash.
The Concord, Calif., company offered special “military financing” to troops: no money down and instant financing on pricey electronics and other goods sold at mall kiosks near military bases.
But a federal consumer watchdog agency says Rome Finance _ also known as Colfax Capital Corp. and Culver Capital _ was profiting from a predatory lending scheme at the expense of military personnel, thousands of whom ended up being hounded to repay debts they didn’t legally owe.
The Consumer Financial Protection Bureau announced Tuesday that more than 17,800 service members who were victimized by the scheme would receive a total of $92 million in debt relief from Rome Finance.
“Rome Finance’s business model was built on fleecing service members,” Richard Cordray, said director of the bureau, in a statement. “Today, their long run of picking the pockets of our military has come to an ignominious end.”
The company couldn’t immediately be reached for comment Tuesday.
The bureau reached a settlement with the company in coordination with 13 states’ attorneys general in Colorado, Delaware, Florida, Georgia, Indiana, Iowa, Kentucky, Massachusetts, Michigan, New York, North Carolina, Tennessee and Vermont.
Kentucky Attorney General Jack Conway said in a statement Tuesday that the predatory actions by Rome Finance were unconscionable.
“I’m pleased that this resolution will provide military members here in Kentucky and across the country with the financial relief they are owed,” he said.
Conway said 228 Kentucky service members would receive a total of $1.2 million in debt relief through the settlement. In Florida, more than 800 service members will receive $4 million.
“Our military members sacrifice so much for us, and we will not allow predatory lenders to deceive them,” Florida Attorney General Pam Bondi said in a statement Tuesday.
More than 1,300 North Carolina military service members _ many of whom took out loans from Rome Finance to buy electronics from Fayetteville-based retailer SmartBuy_will have their credit cleared and $6.8 million in debts forgiven, the state’s attorney general said Tuesday.
“This settlement cleans the slate for military consumers tricked into bad financing deals on overpriced electronics and sends a strong message to illegal debt lenders,” Roy Cooper said in a statement.
According to legal documents filed by the consumer bureau and attorneys general, Rome Finance inflated prices on electronics and other products it sold through mall kiosks in order to conceal exorbitant finance charges. Service members ended up paying Rome Finance many times more than the retail prices of the products they’d bought.
The company also sent billing statements that didn’t include information required by law, such as the loan’s high annual percentage rate and the closing date of the billing cycle.
Rome Finance wasn’t licensed to provide consumer loans, according to the documents, and the APRs it charged were higher than allowed in some states, such as New York and North Carolina. These violations should have voided the debt.
As part of the settlement announced Tuesday, any outstanding debts that service members owe will be erased and reported to credit bureaus as “paid in full.”
But service members can keep the products they bought through Rome Finance.
Rome Finance now is in Chapter 7 bankruptcy and two of its owners, Ronald Wilson and William Collins, are barred from consumer lending.
Secretary of Defense Chuck Hagel welcomed the news that tens of thousands of service members will receive debt relief from Rome Finance.
“No one who serves our country in uniform _ especially during a time of war _ should ever fall victim to predatory financial practices, and today’s announcement is an important step in righting this wrong,” he said in a statement.
James Rosen contributed to this article.
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