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Post date: October 5 2004

Business Agrees To Alter Policy Toward Military Personnel

Attorney General Spitzer today announced a settlement that will help protect military families from unfair credit and debt collection practices.

Under the settlement, The Junction home furnishings store in Watertown will stop its illegal financing and aggressive debt collection practices, and provide refunds to certain military customers, some of whom are currently on duty in Iraq, whose wages were garnished improperly and who were charged exorbitant interest on debt.

"The people of the North Country are famous for the way they support members of the military stationed in their community," Spitzer said. "This particular company was not living up to that high standard, but it has agreed to reform its practices and make a concerted effort to be more sensitive to the hardships faced by soldiers and their families."

An investigation by Spitzer's Watertown office revealed that special financing provided through The Junction required soldiers to sign "confessions of judgment" admitting that they failed to stay current with their repayment plan even before they began making payments. Under the terms of those financial arrangements - illegal under federal and state law - the furniture retailer could commence immediate garnishment of wages with hefty interest charges after a single late payment, which can occur accidentally. Traditionally, businesses take such action only after a formal default on the loan and after consumers have had an opportunity to respond in court.

In fact, The Junction had begun the wage garnishment process against 185 consumers for more than $600,000. When Spitzer's investigation began, the company had already garnished wages in excess of at least $23,000.

The vast majority of consumers whose wages were garnished by The Junction were soldiers now deployed overseas in combat zones. In one case, The Junction attempted to repossess furniture that had been bought on loan by another soldier who had then sold it to the innocent buyer at a garage sale. In another case, The Junction attempted to repossess furniture from a soldier because the retailer perceived an "anticipatory breach" of his loan.

In settling the matter, The Junction agreed to vacate all of the illegally obtained judgments and to:

  • Discontinue financing arrangements that include illegal pre-default confessions of judgment;
  • Cease all wage garnishments without properly obtained legal judgments;
  • Refund within 90 days the full amount of monies collected from previous garnishments; and
  • Forego collection of interest on debts associated with improper financing arrangements. This will result in the saving of nearly $200,000 in excessive interest payments by consumers.

Spitzer said the case was an example for both businesses and consumers.

"Merchants are entitled to collect the debts they are owed. This is especially important for small business operating on tight margins. At the same, companies must be fair to consumers in both credit policies and debt collection practices," Spitzer said.

The investigation was begun after military officials contacted Spitzer's office.

Dwight Austin, Regional Liaison for the Judge Advocate General's office at Fort Drum said: "We are grateful to the New York State Attorney General's office for their prompt and thorough review of the complaints that we referred, and we will continue to cooperate with the New York Attorney General's office in matters which adversely affect our active military personnel."

The Junction, operated by Sally Waite and Edward Sampson, is located at 22040 U.S. Route 11 in Watertown. It also operated a store in Salmon Run Mall until late last year.

This case was handled by John T. Sullivan, Assistant Attorney General In Charge of the Watertown Regional Office.