SmartBuy, a chain of stores that sold high-priced electronics in malls near at least 10 military installations, has closed its doors, an attorney for the company says.
SmartBuy admittedly sold electronics to service members at huge markups plus interest, keeping the forms on hand to help troops pay by allotment (automatic payroll deduction). Now a new electronics dealer with a similar business model — who says he is "absolutely not affiliated" with SmartBuy — has leased North Carolina storefronts in Jacksonville near Camp Lejeune and in Fayetteville near Fort Bragg, both spaces previously occupied by SmartBuy.
East Coast Electronics owner Mike Grala calls his stores Kinetech. He says he's been operating for several weeks in Jacksonville and plans to open in Fayetteville in a month or so.
He says former SmartBuy customers have come in to complain about deals they entered into and he has to point out that his is a new, unaffiliated company.
"I've had a lot of people come in asking about SmartBuy," he says. "They say our prices are a lot lower."
He acknowledges, though, that Kinetech's prices are higher than other retailers. He says he posts signs informing people that they can find cheaper prices elsewhere and that he tells his customers to shop around.
Grala says he marks up his goods a maximum of 240 percent over his wholesale cost.
Kinetech finances its sales with interest rates that vary by applicant. Third-party lenders determine those rates.
"Our finance companies check the debt-to-income ratio," he said. "We don't want to overburden anyone. We walk customers through the cost down to the penny."
The store targets people whose credit isn't sufficient to get financing from the major retail chains. Grala says customers may pay by allotment, monthly check or electronic withdrawal from checking.
"If they don't have the cash or credit to buy elsewhere, it's a second option," says Grala, whose store is in the mall in Jacksonville near Camp Lejeune. His second store is set to open at Cross Creek Mall near Fort Bragg.
Grala says he encourages people who are on the fence about paying so much for electronics to go home and think it over.
"The last thing we do is force anything down anyone's throat," he says.
SmartBuy's troubled past
SmartBuy attracted a lot of bad publicity, says Woody Webb, an attorney for the former retailer.
In less than a year:
• Installation commanders at Fort Sill and Altus Air Force Base, Okla.; Fort Bragg; and Fort Hood, Texas, placed SmartBuy stores off-limits to their troops.
• The New York attorney general filed suit against SmartBuy because of alleged "grossly overpriced" electronics at its Watertown store near Fort Drum.
• SmartBuy settled a lawsuit in Clarksville, Tenn., agreeing to return more than $1 million to 615 soldiers once stationed at Fort Campbell, Ky., while admitting no wrongdoing.
SmartBuy owners acknowledge that their prices were much higher than prices at many other stores. In fact, there were signs "all over the stores and all over the contract that specifically say you can purchase items cheaper elsewhere," Webb says.
"It's an informed transaction. Younger folks have no credit built up. The big-box stores will not finance purchases, so they come to us. They sign on with us, or they go without," he says. "We think we provide[d] a valuable service for those who might otherwise go without."
He says SmartBuy is "vigorously defending" itself against the "unfounded allegations" in the New York lawsuit.
Legal assistance officials at Camp Lejeune are interviewing at least seven young Marines who bought electronics at SmartBuy to determine what action should be taken, says Michael Archer, regional legal assistance officer for Marine Corps Installations East.
North Carolina Department of Justice spokeswoman Noelle Talley says officials dealt with two similar complaints from military enlisted personnel two years ago.
"We were able to help those consumers get their contracts with the company canceled," she says. She encouraged any consumer to file a complaint with her office.
The case of the $3,600 iPad
A Marine sergeant at Camp Lejeune wrote to Military Times expressing his concern about a young Marine student who had paid $2,999 for an iPad at the SmartBuy store in Jacksonville, signing up for a deal that takes one-fourth of his paycheck for 21 months by allotment.
His annual interest rate is 11.76 percent, and he'll pay $173 a month for 21 months. That's $3,600 for an iPad — about five times the price at a military exchange.
The military exchanges' credit card program has provisions that allow for junior troops to get credit, with limits.
The Marine student couldn't be reached, and it was unclear when he bought the iPad. Webb says if the student is able to buy an iPad elsewhere at a cheaper price, he should contact SmartBuy to return the iPad and get a refund and release from the contract.
That's not to say the company can do that for everyone, he says.
Regardless of what you're shopping for, keep these basic things in mind:
• Do your homework and comparison shop. Check online for regular prices and specials at known retailers, and check mail circulars for sales. Check military exchanges' online prices at http://www.shopmyexchange.com/default_s.aspx">www.shopmyexchange.com and https://www.mynavyexchange.com/">www.mynavyexchange.com. Check prices in your local exchange store as well as in civilian retailers.
• If a store posts a sign indicating that you can find a better price on items at other stores, you should strongly consider taking that advice.
• Think about want vs. need. Do you need an electronics item that is way overpriced — so much so that it could hurt you financially?
• Resist sales pitches that pressure you to buy something on the spot. Go home and think about it first. Be especially wary if a salesperson tries to pressure you into setting up an electronic allotment for a purchase.
• Before you sign a contract for anything, take it to your legal assistance office for review. The purchase can wait a few days, no matter what a salesperson says.
• If you're unhappy with a purchase, return it. With electronics, there are generally restrictions if the package has been opened, unless there is a defect in the product.
• If you feel you've been taken advantage of, go to your military legal assistance office for help. Also, contact your state consumer protection office, generally associated with the attorney general's office. State attorney general offices have helped many troops recover money.