David Y.Ige | DCCA Press Release: Consumer Protection Bureau Joins Multi-State Settlement Recovering $34.2 Million for US Servicemen Scammed by Harris Jewelry

HONOLULU – The Hawaii State Office of Consumer Affairs, Department of Commerce and Consumer Affairs, has joined a multi-state agreement co-led by the New York Attorney General and the Federal Trade Commission (FTC) that recovers $34.2 million for more than 46,000 service members and veterans who were deceived and defrauded by national jewelry retailer, Harris Jewelry. The jewelry company used deceptive marketing tactics to lure active-duty service members into their finance program, falsely claiming that investing in the program would improve military credit scores. Instead, servicemen were tricked into getting high-interest loans on overpriced, shoddy jewelry that saddled them with thousands of dollars in debt and worsened their credit.

The deal requires Harris Jewelry to reimburse tens of thousands of service members for warranties they were tricked into buying, stop collecting millions of dollars in debt, fix bad credit ratings and dissolve all operations by Harris Jewelry. This agreement also obligates Harris Jewelry to pay $1 million to the 18 states.

“Service members should not be exploited by companies looking to make a quick buck. This case goes a long way to holding Harris Jewelry accountable for its alleged unfair and deceptive business practices and will provide much-needed financial redress to victims harmed by his conduct,” said Stephen Levins, executive director of the Consumer Protection Bureau.

Harris Jewelry, headquartered in Hauppauge, New York, operated retail stores near and on military bases across the country. Their business model was designed to primarily target and serve the military. A multi-state investigation found local military members were lured into retail stores through a marketing program, dubbed “Operation Teddy Bear,” in which Harris Jewelry advertised teddy bears in uniforms service members with charitable pledges. Investigation revealed that no legal contract had been signed between Harris Jewelry and the charity it claimed to support. Additionally, consumers often received varying and conflicting information about the amount donated to the charity. Sometimes they were told that all the profits would be donated, other times they were told that only a portion would be donated.

In addition, Harris Jewelry offered the military predatory loan contracts that were marketed to the military as a way to establish or improve their credit ratings. Credit extended to service members through the Harris program was not based on consumer credit score, potential income, or other legitimate factors considered by the banks. Rather, it was based on a serviceman’s branch of service, how much time they had left over their enlistment duration, and the category of goods they purchased. Servicemen were led to believe that they were investing in the Harris program and that the jewelry they had purchased was a gift from Harris Jewelry.

The jewelry itself was grossly overpriced and of poor quality. The investigation revealed that the company significantly inflated the retail price of its products, usually by multiplying its wholesale price by six or seven times, and in some cases by 10 times the wholesale price. For example, Harris Jewelry bought its popular Mother’s Medal of Honor for $77.70 but sold it for $799. The jewelry was not worth the price, and consumers often reported stones falling off, chains breaking, and the finish fading.

Harris offered the military jewelry protection plans, which they said were optional but were added to almost every eligible transaction without their knowledge. Protection plan costs ranged from $39.99 to $349.99, depending on the retail price of the item. In some cases, the cost of the protection plan exceeded the wholesale price paid by Harris for the item. Protection plans have been added to a consumer’s retail contract as standard practice without disclosure to the consumer.

With the inflated purchase price, protection plans, taxes, shipping and handling, teddy bears and other charges, the servicemen were charged more than they were initially told. Using the $799 Mother’s Medal of Honor as an example, the military was billed $79.99 for a protection plan, taxes, and other fees, bringing the main total cost to $974.31. At an interest rate of 14.99% over a 10-month period, the total amount paid by a member ended up being $1,039.26 for the Mother’s Medal of Honor.

Essentially, Harris Jewelry used charity appeals as a marketing tactic to dupe the military into deceptive and costly in-house funding deals for very expensive jewelry. Jewelry was of poor quality, prices were highly inflated, finance contracts had hidden fees, and payments were tied directly to military paydays.

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 relating to jewelry sales and financing to members of the military.

Specifically, the States and the FTC allege that Harris Jewelry:

• Made false or unsubstantiated statements that financing jewelry purchases through the company would lead to higher credit scores: the company told the military that it would get a significant improvement in their credit score entering into a retail contract with Harris Jewelry when in fact that was not true in many cases.
• Wrongly stated that the protection plan was necessary to fund purchases: As part of the sale of military-themed jewelry and gifts, Harris Jewelry offered a protection plan that covered ring and watch sizing, replacement batteries and repairs. On several occasions, the company gave the false impression that the protection plan was not optional or was necessary to finance the purchase, when in fact it was optional.
• Failed to Provide Written Disclosures and Failed to Meet Clearance Requirements for Contracts as Required by Law: Harris Jewelry failed to include written disclosures in its retail contracts as required the Truth in Lending Act and the Military Loans Act and has failed to meet the authorization requirements required by the Electronic Fund Transfers Act. Its Internet and print advertisements also failed to include the required disclosure of truth in the loans. The company also failed to provide written notice as required by the FTC Holder Rule in its contracts and failed to make oral disclosures at the time of sale as required by military loan law.

Today’s agreement requires Harris Jewelry to stop collecting $21,307,229 in debts held by 13,426 service members and repay $12,872,493 to 46,204 service members who paid for protection plans. In Hawaii. 99 members will have a debt of $145,436 canceled and 918 members will be reimbursed for $295,068. Harris Jewelry is also required to vacate judgments against 112 consumers totaling $115,335.64 and remove all negative credit entries reported to consumer reporting agencies.

Service members and veterans who took out a predatory finance loan with Harris Jewelry between January 2014 and July 2022 will be eligible for restitution as long as they paid the collateral. An independent monitor will be set up to oversee relief and contact eligible service members and veterans. Eligible service members and veterans will receive an email and letter in the mail advising them of this agreement and their eligibility, service members must then claim their return.

The states of California, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Iowa, Kansas, Louisiana, Maryland, Nevada, New York, North Carolina, Pennsylvania, Virginia and Washington join Hawaii and the FTC in the agreement to today.

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Media Contact:

Guillaume Nhieu

Communications Officer

Department of Commerce and Consumer Affairs

E-mail: [email protected]

Phone: (808) 586-7582

Cell: (808) 389-2788