U.S. Sen. Richard Blumenthal called Monday for the Federal Trade Commission to crack down on “predatory” debt collection tactics of certain retailers targeting military servicemembers.
Blumenthal said he was one of six senators to write last week to the FTC as well as the Consumer Financial Protection Bureau asking that the agencies close a loophole, which he said creditors like USA Discounters have exploited at the expense of military families.
“Literally, servicemen and women while they are fighting, have their bank accounts frozen, their pay seized, and their lives disrupted without a fair fight, without being able to return fire,” he said at a press conference Monday in the Legislative Office Building.
Blumenthal pointed to an investigation by ProPublica and the Washington Post, which found that USA Discounters guarantees servicemembers credit on expensive items and then takes them to court if they do not stay up-to-date on their payments. He said the contracts issued to military members require those court cases to take place in Virginia, near where USA Discounters is based.
That puts the litigation out of reach for servicemembers across the country, some of whom are deployed overseas, he said. Virginia rules permit the court to pick an attorney to represent the military members, under the recommendation of the creditor, Blumenthal said.
“Almost all of these actions are assigned to a single lawyer, who is not required to provide any standard defense. It’s justice in name only. There really is not aggressive or avid defense of the servicemen,” he said.
Mel Hewston, former state commander of the Veterans of Foreign Wars, said it is more difficult on members who are deployed.
“If they’re deployed overseas to Korea or even to a combat zone, the likelihood of them being able to come back and defend themselves are nearly impossible,” Hewston said.
Blumenthal said USA Discounters has locations near many of the major military bases across the country and servicemembers hear commercials pitching credit deals. He said the deals also come with high interest rates, price markups, and layered warranty fees.
The FTC and the CFPB have the authority to issue regulations ending the practice, without the need for legislative action, he said. The letter signed by Blumenthal and five other senators asks the agencies to issue regulations and “explicitly prohibit” creditors from suing servicemembers in courts far from where they are located.
Blumenthal said he had not heard any feedback from the two agencies in response to the letter sent last week. He said he was “troubled” by the federal government’s inaction on the issue so far.
“One way or the other, they should act now and they can under existing authority,” he said. “We may need to close that loophole legislatively, but this practice is unfair and deceptive. So they have authority under existing law.”
A spokesperson for USA Discounters issued a statement Monday from the company’s vice president, Timothy W. Dorsey. The statement rejected the underlying ProPublica report as “irresponsible allegations and inaccurate reporting.” He said the piece omitted information which refutes the story’s premise.
“Given how wrong of a picture the story portrayed, it is not surprising that it has raised questions and concerns from elected officials. The company has reached out to Senator Blumenthal and we welcome the opportunity to speak with him in an open and transparent way to address any questions or concerns he has about the company and, in particular, its relationship and dealings with the men and women serving our country. If there are changes that can or should be made we want to be at the forefront of that change,” he said.
The company defended the use of Virginia courts, pointing out that military personnel move frequently.
“Military customers are often no longer residing in the purchasing jurisdiction when court action must be taken — making the purchasing jurisdiction irrelevant, at best, to the military customer,” the statement said.