The State of Hawaii Office of Consumer Protection, Department of Commerce and Consumer Affairs, joined a multistate 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 servicemembers and veterans who were deceived and defrauded by national jewelry retailer, Harris Jewelry. The jewelry company used deceptive marketing tactics to lure active-duty servicemembers to their financing program, falsely claiming that investing in this program would improve servicemembers’ credit scores. Instead, servicemembers were tricked into obtaining high-interest loans on overpriced, poor quality jewelry that saddled them with thousands of dollars of debt and worsened their credit.

The agreement requires Harris Jewelry to refund tens of thousands of servicemembers for warranties they were tricked into purchasing, 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.

“Servicemembers should not be taken advantage of by businesses looking to make a quick buck. This case goes a long way in holding Harris Jewelry accountable for engaging in alleged unfair and deceptive trade practices and will provide needed monetary relief to victims harmed by its conduct”, said Stephen Levins, Executive Director of the Office of Consumer Protection.

Harris Jewelry, headquartered in Hauppauge, New York, operated retail stores near and on military bases around the country. Their business model was designed to primarily target and service people in the military. A multi-state investigation 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. The investigation found that no legal contract was actually 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 legitimate 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 they 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. The investigation found that the company dramatically 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. The jewelry was not worth the price and consumers often reported stones falling out, chains breaking, and the finish fading.

Harris offered servicemembers protection plans on the jewelry, which they claimed was optional but was added to nearly all eligible transactions without their awareness. The costs of the protection plans ranged from $39.99 to $349.99, depending on the retail price of the item. In some instances, 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 to the consumer.

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. 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 percent interest rate over a 10-month period, the total amount paid by a servicemember ended up being $1,039.26 for the Mother’s Medal of Honor.

In essence, Harris Jewelry used charity pleas as a marketing tactic to dupe servicemembers into high-priced, deceptive in-house financing contracts for vastly overpriced jewelry. The jewelry was poor quality, the prices were highly inflated, finance contracts had hidden fees, and the payments were directly tied to the military pay days.

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 FTC allege that Harris Jewelry:

• Made false or unsubstantiated claims that financing jewelry purchases through the company would result in higher credit scores: The company told servicemembers that they would achieve a significant improvement in their credit score by entering into a retail installment contract with Harris Jewelry when, in fact, that was not true in many instances.
• Misrepresented that the protection plan was required to finance purchases: In connection with the sale of jewelry and military-themed gifts, Harris Jewelry offered a protection plan that covered ring and watch sizing, battery replacements, and repairs. In several instances, the company gave the false impression that the protection plan was not optional or was required to finance the purchase, when it was in fact optional.
• Failed to provide written disclosures and meet authorization requirements for contracts as required by law: Harris Jewelry failed to include written disclosures in its retail installment contracts as required by the Truth in Lending Act and Military Lending Act and meet authorization requirements as required by the Electronic Fund Transfer Act. Its internet and print ads also failed to include the required Truth in Lending disclosure. The company also failed to provide written notice as required by the FTC’s Holder Rule in its contracts and failed to make oral disclosures at the time of sale as required by the Military Lending Act.

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. In Hawaii. 99 servicemembers will have $145,436 in debt canceled and 918 servicemembers will be refunded $295,068. 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 letter in the mail notifying them of this agreement and their eligibility, servicemembers will then have to claim their restitution.

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