Harris Jewelry to Pay Millions in Predatory Lending Settlement

CrimeJul 26, 2022

Harris Jewelry to Pay Millions in Predatory Lending Settlement

The jeweler is accused of defrauding thousands of U.S. military members.

Accused of defrauding U.S. service members through predatory lending practices, Harris Jewelry will pay more than $34 million in a settlement deal announced last week by the Federal Trade Commission and 18 state attorneys general. (Image courtesy of Harris Jewelry’s Facebook page)
Hauppauge, N.Y.—Harris Jewelry will have to pay millions in refunds to customers and stop collecting on loans following a settlement deal announced last week by the Federal Trade Commission and 18 state attorneys general.
The Hauppauge, New York-based retailer, which catered to members of the military and their families, was the focus of an October 2018 complaint from the New York State Attorney General’s office.
The lawsuit alleged the retailer marked up its jewelry between 600 and 1,000 percent and misled service members so they would sign financing agreements with high interest rates.
Similar complaints were made in 17 other states.
The settlement, which extends to all 18 states, requires Harris Jewelry to issue $12.9 million in refunds to more than 46,200 customers who were said to unknowingly have paid for supposedly optional “lifetime protection plans.”
The retailer will also have to cease collections on $21.3 million in loans currently held by more than 13,400 customers.
When customers fell behind on payments, Harris Jewelry reported them to credit agencies, according to the attorney general’s office. Now, under the terms of the settlement, the company will also have to vacate judgments against 112 consumers, totaling more than $115,300, and delete any negative credit entries.
“The settlement, in which Harris Jewelry neither admitted nor denied the allegations, resolves these matters in the best interest of all its stakeholders,” Harris Jewelry said in a statement.
The settlement also requires Harris Jewelry to pay $1 million in total to the 18 states.
New York will receive $150,000, which Attorney General Letitia James will donate to Fort Drum, the largest military base in New York, and the site of a former Harris Jewelry store.
“It’s abhorrent that Harris Jewelry built their business by taking advantage of young servicemembers risking their lives to protect our country,” James said. 
“Harris Jewelry claimed to serve and support our troops, but its business practices were entirely self-serving. For years, Harris Jewelry misled military members and saddled them with thousands of dollars of debt.”
The now-shuttered retailer operated on and near U.S. military bases. It closed all of its stores in May 2021 in the wake of the COVID-19 pandemic but still has an online presence.
James’ office said 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.
There are three main accusations against the jeweler. 
The company is accused of falsely telling customers that financing jewelry through the company would boost their credit scores, which was not true in most cases.
The credit was advanced through the “Harris Program,” an in-house financing plan. While banks usually consider a person’s credit score, income, and other factors, the Harris Program allegedly looked at a servicemember’s branch of service, the amount of time they had remaining on the term of enlistment, and the category of merchandise they purchased.
Harris Jewelry is also accused of misrepresenting its protection plans, claiming in several instances that protection plans were required to finance a purchase when it was actually optional.
Protection plans ranging in price from $40 to $350 were also said to be routinely added to customers’ bills without disclosure. In some cases, the cost of the protection plan allegedly surpassed the wholesale cost of the jewelry. 
Lastly, the company allegedly did not provide written disclosures in its retail installment contracts or meet the authorization requirements for contracts required by law.
Its internet and print ads also did not include the required disclosures, as per the Truth in Lending Act, James’ office said.
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In addition to these main accusations, the company was also said to sell low-quality goods.
“The jewelry itself was significantly overpriced and poor quality,” said James’ office. “The jewelry was not worth the price, and consumers often reported stones falling out, chains breaking, and the finish fading.”
Harris Jewelry was also accused of using a fake charity drive to draw in customers.
The stores ran an “Operation Teddy Bear” promotion, selling teddy bears dressed in military uniforms, claiming the proceeds would go to Operation Troop Aid, a charity that would send care packages to military members deployed overseas.
The OAG’s investigation found there was no legal contract between Harris Jewelry and Operation Troop Aid. 
Operation Troop Aid shut down in July 2018 following an investigation by the FTC and the National Association of State Charity Officials, which looks into charities suspected of falsely claiming to support servicemembers and veterans.
“Today’s action against Harris Jewelry shows that companies that target our country’s servicemembers with false promises and deceptive sales practices will face serious consequences,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection.
Servicemembers and veterans who entered into predatory financing loans with Harris Jewelry, starting in January 2014, will be eligible for restitution.
Those eligible will receive an email and a letter in the mail with a notification about the agreement.
Attorney General James and the FTC were joined in the agreement by the attorneys general of California, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Iowa, Kansas, Louisiana, Maryland, Nevada, North Carolina, Pennsylvania, Virginia, Washington, and Hawaii's Office of Consumer Protection.
Lenore Fedowis the associate editor, news at National Jeweler, covering the retail beat and the business side of jewelry.

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