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SmartBuy and Rome Finance Co.: Anatomy of an Off-Post Scam


We’ve all seen them: The tote-the-note car dealerships, payday loan hawkers, electronics stores and tattoo parlors that inhabit the strip malls just outside the gates of military posts throughout the world. Some of them serve a legit need – such as the demand for short-term credit with no credit check to make end-of-month expenses or keep a car running so the borrower can get to work.

Military members, they know, have a steady paycheck – and a commanding officer, first sergeant or chief petty officer to contact if the service member doesn’t pay.

There’s a benefit to this system: Military members, by and large, enjoy easy access to credit. But in some cases, off-post businesses cross the line from earning a reasonable profit on products and services rendered, and their exploitation of service members becomes so egregious it attracts the attention of post commanders and even state attorneys general.

That’s what happened recently with one business, SmartBuy, an electronics retailer working with Rome Finance Company, Inc., in California. SmartBuy operated kiosks in Salmon Run Mall specifically to attract military customers. Curiously, if you went to SmartBuy and tried to pay with cash or your own credit card, they wouldn’t take it. According to the Watertown Daily Times, the only way you could pay is through their in-house financing company. And only via direct payroll deduction, or allotment.

According to the New York State Attorney General’s investigation, SmartBuy’s sales staff was trained to target soldiers shopping in uniform or who had military style haircuts. Further, the state AG determined that the company not only sold product marked up between 225 and 335 percent over the original retail price (not in itself generally illegal), but that the sales staff never disclosed to soldiers that they were actually opening up a line of credit, rather than purchasing a computer outright.

The Attorney General’s web page contains additional information on how the company marketed to Servicemembers.

To add insult to injury, there was no prepayment option. Even after having paid 2 to 3 times what they could buy the same computer for elsewhere, soldiers were still stuck with the high interest payments.

But soldiers began to complain about the fine print and onerous financing terms in the finance contracts – which attracted the attention of the state Attorney General. The AG came in and filed suit against Rome Financial Company, which immediately shut down the SmartBuy operation.

  • In August 2008, a soldier preparing to deploy to Afghanistan, where his wife was already serving, was told he could get a “really good deal” by “bundling” a purchase including a laptop, iPod, camcorder, and PSP for a monthly $90 direct withdrawal (allotment) from his paycheck. In reality, the final price SmartBuy charged was at least double the normal retail price for the items. Two days later, he attempted to return the unopened items, but he was told by the manager he could not return them without paying a $400 restocking fee in cash.
  • In April 2009, a soldier currently serving in Iraq visited the SmartBuy store with his wife and purchased a 47” LCD TV for $4,632.17, plus an additional 12 percent interest. His wife later found the same model for sale at Sam’s Club for approximately $1,100.
  • In June 2007, a soldier was told by a SmartBuy sales representative that she could get him a “good deal” on a computer. He ended up in an agreement allowing SmartBuy to charge him $3,945 for the item, which would be available for pickup in two days. That same day, after speaking with his wife and finding the same computer elsewhere for $800, he canceled his order and allotment. Approximately one year later, he began receiving phone calls and emails from a finance company attempting to collect on the nonexistent debt, even while he was deployed in Afghanistan. After he returned home in 2010, a company representative contacted the soldier’s commanding officer over the nonexistent debt. At this point, the company was trying to collect $4,800 from the soldier.

The company made it easy for soldiers deploying with the 10th Mountain Division to get laptops, for example, to stay in touch with families during their many overseas deployments. Soldiers soon found out, however, that including up front interest payments and fees, collected in violation of New York state law that limits interest rates to 25 percent, SmartBuy customers paid effective interest rates as high as 244 percent per annum.

The sales process, according to the State Attorney General’s court complaint, was incredible: The company did not keep a cash register or credit card terminal on hand. All cash or credit transactions but for a few de minimus sales were done by “special exception” Instead, the company had Servicemembers log on to a computer terminal to access their own pay records. The sales representative would look at how much unattached pay was available, and look at how long servicemembers had left on their service obligations.

From there, the company had a problem: Direct allotments from paychecks can only be done for the servicemember’s benefit. SmartBuy got around this, according to the New York AG’s office, by opening up a dummy bank account at First Citizens Bank of Kentucky. From there, the finance companies – generally Rome Capital or Integrity Financial, required the servicemembers to authorize transfer payments to them. In most cases, according to the AG, the servicemember had no idea that there was another savings account being opened for them.

If the servicemember disputed the debt, the lenders – Rome Capital or Integrity Finance – would call the service member’s commanding officers – a violation of the Fair Debt Collection Practices Act.

Among the State AG’s findings:

  • SmartBuy’s merchandise was actually purchased from other retailers, including Sam’s Club, Costco and Wal-Mart. A former employee told investigators she witnessed a coworker taking merchandise purchased from the local Sam’s Club and “preparing” it by removing any Sam’s Club stickers and identifiers from the boxes.
  • Before hiring, a prospective employee reported being asked by personnel from SmartBuy’s corporate office how they felt about “selling overpriced items to customers.”
  • The operation did not typically hire military service members at SmartBuy because they would then “know what we did here,” according to a former employee.

The New York Office of the Attorney General is still engaged in a lawsuit against Rome Financial Company and SmartBuy’s other finance companies. Specifically Frisco Marketing of NY, LLC doing business as SmartBuy and SmartBuy Computer and Electronics; Integrity Financial of North Carolina, Inc.; Britlee, Inc., doing business as MilitaryZone; GJS Management, Inc., and Rome Finance Company, Inc. and Rome Finance Co., LLC, all owned and/or operated by Fayetteville, NC based John Paul Jordan, Stuart Jordan and Rebecca Wirt, and Concord, California-based William Collins and Roland Wilson.

According to the New York State AG’s office, SmartBuy still operates several stores near military posts across the country, including Cross Creek Mall in Fayetteville, North Carolina, Killeen Mall in Killeen, Texas, The Citadel in Colorado Springs, Central Mall in Lawton, Oklahoma, Cielo Vista Mall in El Paso, Texas, and Oglethorpe Mall in Savannah, Georgia.

This isn’t Rome Finance’s first rodeo. The company had previously sought bankruptcy protection in California as a result of a $10 million judgment which resulted from similar complaints in the State of Tennessee where they had been banned from doing business.

A representative from Rome Financial was contacted for this story, but refused to be identified by name. She stated that the lawsuit was “Old news, and no one would be interested in it now.” She declined further comment.

The company now answers phones with the company name “Colfax Capital.” A representative from the company’s Georgia affiliate confirms that the company used to be called “Rome Financial.”

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