States agree to close jewelry stores over predatory practices on soldiers

New York State Attorney General Letitia James attends a briefing in Manhattan, New York on July 13, 2022. (Luiz C Ribeiro/TNS)

New York, FTC, 17 others

WATERTOWN, NY (Tribune News Service) – “Don’t feed the bear,” soldiers from the 10th Mountain Division were told as they began their first deployment at Fort Drum. It’s a warning about a marketing tactic used by a jewelry chain with locations across the country, including one here in Watertown, that decimated the financial stability of thousands of soldiers.

In a news conference at the Dulles State Office Building in Watertown on Wednesday, Attorney General Letitia A. James, her colleagues at the local branch of the Attorney General’s Office, a former Fort Drum financial literacy teacher and a veteran defense attorney detailed how Harris’ jewelry defrauded military personnel with unfair, illegal and deceptive financing schemes presented as a means of improving creditworthiness.

The Ronkonkoma, Suffolk County-based company has been sued by the Attorney General of New York and several other states for its practices, and on Wednesday the Attorney General announced they had entered into an unsanctioned agreement to reclaim more than 34.2 Millions of dollars for more than 46,000 soldiers and veterans affected by Harris’ plan.

“It all started with an innocent teddy bear,” said Ms. James.

Harris employees used stuffed bears in work clothes to advertise in front of storefronts in towns near military installations. A Harris location was open at Salmon Run Mall in Watertown from 2014 to April 2021 when all storefronts were closed due to the pandemic. The company operated online until December 2021, when it halted its financial program under an agreement with the attorney general. The Attorney General’s investigation into the deals began in 2017, and the first lawsuits were filed in 2018.

The Harris salesmen lured service members into the store and promised that the entire company was dedicated to meeting the needs of the men and women in uniform. In Operation Teddybear, soldiers were told that some or sometimes all of the proceeds from their purchase would go to a military-affiliated charity that sends aid packages to deployed troops.

“There was never a written contract between Harris and this charity,” Ms James said. “Operation Teddybear was a marketing ploy to get soldiers to walk through their doors, and once soldiers were lured in with the teddy bears, staff were instructed to inform them of the benefits of their funding program called the Harris Program.”

Advertisements, documents, and in-store pitches billed the Harris program as a tool to help soldiers improve their credit scores or make large purchases. They were given a line of credit and an agreement to pay a certain amount of money per month or per paycheck that would eventually flow back to them.

Service members who signed up for the program were told they could select Harris jewelry as gifts with the program.

In reality, Harris Jewelry granted lines of credit to soldiers, the amounts and rates of which were based solely on the service member’s industry, length of enlistment, and the type of jewelry selected. The “gift” of jewelry was actually a purchase made on a line of credit issued by Harris. This line of credit was grossly unfair, with 15% interest rates, payments over the agreed amount, and the additional cost of the “gift” jewelry clipped on top. Customers were not even given the correct paperwork for their agreements.

Furthermore, the jewelry that the soldiers actually bought was massively overpriced, with some items in stores being over 10 times more expensive than wholesale prices. The pieces were of poor quality, with settings that would break easily, and soldiers often had to pay hundreds of dollars for jewelry that had long since broken.

“Harris Jewelry’s business practices would only be described as pure deception,” she said. “The scam. And today they’re paying the price.”

The New York portion of this case and the investigation of its local implications was conducted by the Attorney General’s Watertown Regional Office, led by Assistant Attorney General Deanna R. Nelson and Assistant Attorney General Julia Toce. The office was assisted by investigator Chad Shemindine under the supervision of Assistant Attorney General Jill Faber in the Regional Affairs Division.

With the support of the Federal Trade Commission, New York and 17 other states are suing Harris Jewelry over its practices, with the latest development being a final order issued by the FTC requiring the company to cease its practices. The order will have the force of law if approved by a federal district court judge, which is likely to happen soon.

Under the terms of the agreement, Harris Jewelry must stop collecting the more than $21 million in outstanding debt for 13,400 Soldiers under the Harris program and repay more than $13 million to the 46,000 Soldiers who completed the payment program . Harris Jewelry’s website states that the company has already begun this process, with a message saying that the Harris program, also known as CACUSA, is no longer accepting payments, writing off all existing balances and demanding the removal of the three credit bureaus all negative grades from Harris Program consumer reports.

In New York, 443 soldiers will be forgiven about $750,000 in debt and 1,692 soldiers will receive a total of about $480,000 in repayments.

The company must also completely dissolve all of its business units and pay a total of $1 million to the 18 states in the agreement. New York’s portion of the money, $150,000, will be given to Jefferson County, which in turn will give the money to the Joseph P. Dwyer Veteran Peer Support Center to specifically assist veterans and service members in educating veterans and service members in financial literacy and to prevent others from taking advantage of soldiers like these again.

Tim Crytser, Veteran Outreach Coordinator at the Peer Support Center, said he was honored to receive the $150,000 investment. He said he’s seen many veterans in the area face similar predatory lending practices and it’s becoming a major burden for those people.

“Once the debt is there, everything else starts snowing, her whole life, her car, her family, her house,” he said. “It starts with the bad, crappy diamond, and it spirals all the way down, and what they usually say is they never saw it coming. Well I guarantee you will see it coming now.”

John Harrington, a former financial preparedness advisor at Fort Drum in the late 2000s and early 2010s, said he frequently saw loan programs targeting soldiers and said the problem was much bigger than Harris Jewelry. Another company that once had a store in the Salmon Run Mall, SmartBuy, bought cheap laptops from nearby retailers like Walmart and sold them back to soldiers in Watertown at grossly inflated prices. All Watertown SmartBuy loans were funded by unlicensed foreign companies and the company was eventually wound up.

“They were one of many different companies in the area, the furniture stores, the payday lenders, the short-term lenders,” he said. “I think of soldiers trying to buy cars in this area. They almost have to go to Syracuse to get a fair deal on a car because all the dealerships in that area are trying to rip them off.”

Ms. James said her office and local branches of the Attorney General’s Office like those in Watertown will continue to fight to protect soldiers and not allow such predatory scams to be targeted again, with the help of regional offices and New York people like Ms. Nelson and Ms Toce.

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