Delaware Attorney General Kathy Jennings, her counterparts in 18 states and the Federal Trade Commission secured a recovery of $34.2 million for more than 46,000 service members and veterans nationwide.
Harris Jewelry (no relation to Harris Jewelers in New Castle County) was accused of deceptive marketing tactics to lure active-duty servicen members to their financing program, claiming that investing in this program would improve service members’ credit scores. Instead, servicemembers were tricked into get high-interest loans on overpriced, poor quality jewelry that saddled them with thousands of dollars of debt and worsened their credit, Jennings stated.
Harris Jewelry closed its retail stores in 2021 as litigation continued.
The 18-state agreement requires Harris Jewelry to refund tens of thousands of service members for warranties they purchased, to stop collecting millions of dollars of debt, to correct bad credit scores, and dissolves all of Harris Jewelry’s businesses. This agreement also requires Harris Jewelry to pay $1 million to all 18 states. There was no state by state dollar figure for the amount recovered.
“Harris Jewelry’s conduct was unconscionable,” Jennings stated. “Instead of the honor, respect, and support owed to all who are serving and have served our country, Harris Jewelry preyed on those populations for a cheap buck. Today’s agreement serves as a stark reminder to those, like Harris Jewelry, who would do so that neither Delaware nor her sister states and commonwealths will allow such conduct to go without consequence. It is also a reminder to all of us of the debt we all owe to this country’s servicemembers and veterans.”
Harris Jewelry, headquartered in Hauppauge, NY, operated retail stores near and on military bases around the country. Their business model was designed to primarily target and servicemembers. A multi-state investigation led by New York found that local servicemembers were enticed into retail stores through a marketing scheme, dubbed “Operation Teddy Bear,” in which Harris Jewelry advertised teddy bears in military uniforms with promises of charitable donations. That investigation found that no legal contract wasactually signed between Harris Jewelry and the charity it claimed to support. Moreover, consumers were often given varying and conflicting information about the amount donated to the charity. Sometimes they were told all the proceeds would be donated, other times they were told only a portion would be donated.
In addition, Harris Jewelry offered servicemembers predatory lending contracts that were marketed to servicemembers as a way to build or improve their credit scores. The credit advanced to servicemembers through the Harris Program was not based on a consumers’ credit score, potential income, or other factors that banks consider. Rather, it was based on a servicemember’s branch of service, the amount of time they have remaining on the term of enlistment, and the category of merchandise purchased. Servicemembers were led to believe that they were investing in the Harris Program and the jewelry they purchased was a gift from Harris Jewelry.
The jewelry itself was significantly overpriced and poor quality, according to a release. The investigation found that the company inflated the retail price of its products, generally by multiplying its wholesale cost by six or seven times, and in some cases 10 times the wholesale cost. For example, Harris Jewelry purchased its popular Mother’s Medal of Honor at $77.70 but sold it at $799. and consumers often reported stones falling out, chains breaking, and finish fading, a release from Jennings’ office stated.
Harris offered servicemembers protection plans on the jewelry, which they claimed was optional but was added to nearly all eligible transactions without their knowledge. The cost of the protection plan exceeded the wholesale cost Harris paid for the item. Protection plans were added to a consumer’s retail installment contract as a routine practice without disclosure.
With the inflated purchase price, protection plans, taxes, shipping and handling fees, teddy bears, and other fees, servicemembers were charged more than they were initially told, the release stated. Using the $799 Mother’s Medal of Honor as an example, servicemembers were charged $79.99 for a protection plan, taxes, and other fees, bringing the total principal cost to $974.31. At a 14.99% interest rate over a 10-month period, the total amount paid by a service member ended up being $1,039.26 for the Mother’s Medal of Honor.
According to today’s consent order, Harris Jewelry violated the FTC Act, the Truth in Lending Act, the Electronic Fund Transfer Act, the Military Lending Act, the Holder Rule, and state laws in connection with jewelry sales and financing to members of the military.
Specifically, the states and the FTC alleged that Harris Jewelry had done all of the following:
Today’s agreement requires Harris Jewelry to stop collecting $21,307,229 in outstanding debt that is held by 13,426 servicemembers and to provide $12,872,493 in refunds to 46,204 servicemembers who paid for protection plans. Harris Jewelry is also required to vacate judgments against 112 consumers totaling $115,335.64 and delete any negative credit entries reported to consumer reporting agencies.
Servicemembers and veterans who entered into a predatory financing loan with Harris Jewelry between January 2014 and July 2022 will be eligible for restitution to the extent they paid for warranties. An independent monitor will be installed to oversee the relief and contact eligible servicemembers and veterans. Eligible servicemembers and veterans will receive an email and a letter in the mail notifying them of this agreement and their eligibility. Servicemembers will then have to claim their restitution.
The 17 states joining Delaware and the FTC in the agreement are California, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Kansas, Louisiana, Maryland, Nevada, New York, North Carolina, Pennsylvania, Virginia, and Washington.
The matter was handled by Deputy Attorneys General Jordan Braunsberg and Paralegal Zuri Ramsey of the Fraud Division’s Consumer Protection Unit.
