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Movie buffs may remember Paper Moon, the 1973 film directed by the late great Peter Bogdanovich. Set in Depression America, the film starred father and daughter Ryan and Tatum O’Neal, as well as the inimitable Madeline Kahn. The elder O’Neal played a con man, Moses Pray, whose cons consisted in visiting recently widowed wives and convincing them that their late husbands had just ordered a fancy Bible with a personal dedication for them. The widows would then pay the scammer for the Bibles. The film is a charming comedy/drama.
In real life, however, targeting the weak isn’t so charming. Back in 2018, the New York Attorney General filed a lawsuit against Harris Jewelry alleging that the company engaged in false and fraudulent acts and illegal lending in connection with financing jewelry sales to active duty members. Now, the FTC has just announced that the company is finalizing a settlement with the FTC and 18 states. The FTC and the Attorneys General alleged that Harris Jewelry used deceptive marketing tactics to get active duty military personnel, particularly junior military personnel in the lowest pay bracket, to enroll in the company’s financing program. The company’s alleged tactics included that the sales representatives falsely claimed that investing in the program would improve the creditworthiness of service members. The agents also failed to provide required disclosures for these agreements; and has failed to obtain the required positive consent for electronic fund transfers.
According to the complaint, as a result of Harris Jewelry’s tactics, tens of thousands of service members ended up with “high-interest loans for poor-quality, overpriced jewelry, leaving them with thousands of dollars in debt and worsening their credit ratings.”
Thank you for your service.
Based on these and other allegations, the FTC and the states charged the defendant with violations of the FTC Act, the Electronic Funds Transfer Act (EFTA), the Holder Rule, violations of state law, and, for the first time, the Military Lending Act. And now, under the proposed order with the FTC and state AGs, the company must stop collecting millions of dollars in debt, provide nearly $11 million in refunds for purchased protection plans, issue overpayment refunds, and help consumers clean up their credit reports. The company must also complete its shutdown and disband in accordance with applicable state law once it has fulfilled its obligations under the order.
This is not the first and certainly not the last enforcement action against predatory and deceptive advertising and practices targeting Service Members. As the New York Times reports, “the soldiers’ regular paychecks — and the financial naivety of many young recruits — are a powerful lure for peddlers.”
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