Thirteen states have settled an investigation into improper lending with a court agreement that is expected to provide $92 million in debt relief for 17,800 U.S. military personnel.
State Attorney General Greg Zoeller said the settlement will erase $1.5 million of bad debt for 261 military members from Indiana.
Deceptive practices by Rome Finance Co., more recently doing business as Colfax Capital Corp. and Culver Capital LLC, based in California and Georgia, included failing to accurately disclose charges and interest rates, New York's Attorney General Eric Schneiderman said Tuesday. Authorities also alleged the lenders helped retailers inflate prices, with repayments taken from soldiers' paychecks.
Authorities say military personnel will keep financed merchandise like computers and gaming systems with debt forgiven, including $2.2 million for more than 550 New York residents.
The federal Consumer Financial Protection Bureau also investigated. The states involved are Colorado, Delaware, Florida, Georgia, Kentucky, Indiana, Iowa, Massachusetts, Michigan, New York, North Carolina, Tennessee and Vermont.
Signed settlement documents were filed last month in federal bankruptcy court in California. The lending companies filed for reorganization in 2008 in a case that was converted last year to a liquidation proceeding.
"Rome Finance lured service members in with the promise of instant financing on expensive electronics, then masked the finance charges with inflated prices in marketing materials and later withheld key information on monthly bills," said Richard Cordray, director of the Consumer Financial Protection Bureau. "Today, their long run of picking the pockets of our military has come to an ignominious end."
Jeremy Katz, attorney for the bankruptcy trustee, declined to comment Tuesday about the announced settlement. He said the bankruptcy case isn't over yet.