Conn's HomePlus SCRA Settlement: 6% Cap Denied on Store Credit

What happened

On September 15, 2020 the United States sued Conn Credit I, LP, Conn Appliances, Inc. and Conn's, Inc. in the Houston Division of the Southern District of Texas. Conn's sells furniture, mattresses, electronics and appliances through Conn's HomePlus stores in over 130 locations in at least 14 states, and finances purchases with its own retail installment contracts. DOJ called it the Department's first SCRA case against a consumer retail store.

The complaint's lead example is an Oklahoma National Guard sergeant. Before entering service he financed a computer and a dining room set at a Conn's HomePlus in Oklahoma City, and by July 2017 the consolidated contract carried $5,063.93 at 21 percent, repaid at $208.01 a month. Orders dated May 2, 2018 sent him to Fort Hood on June 29, 2018 for a 400-day activation. He requested the 6 percent rate in writing on May 5 and sent his orders on May 7. In late July his wife was told the payment had not changed. When she called on September 13 to arrange repayment after two missed payments, a billing agent collected a $189.28 extension fee, a charge the complaint says is itself interest under the SCRA. The rate came down around October 2018, but only from June 29 rather than from May 2, the date of his orders.

Conn's counsel told the United States in writing that of “322 servicemember accounts [that] requested SCRA benefits from March 2014 to May 2019,” 184 did not receive the full benefit, which the complaint puts at 57 percent. The complaint also quotes a representative telling an approved servicemember whose $72.76 payment had not changed that the SCRA “means is that more of the $72.76 is going towards principle [sic] [and] less towards interest.” The complaint points out that the SCRA expressly prohibits accelerating principal in response to a rate-cap request.

The written policies the complaint challenged required a payment before active duty, required the servicemember to be on active duty when asking, required orders showing a release date, and started a reservist's benefit on the first day of active duty instead of the date orders arrived. DOJ opened its investigation after a referral from the Army Staff Judge Advocate at the Oklahoma National Guard Joint Force Headquarters. The court entered the consent order on January 29, 2021; the Conn defendants neither admitted nor denied the allegations and asserted they had no specific intent to violate the SCRA.

The law behind this: 50 U.S.C. § 3937

Maximum rate of interest on debts incurred before military service: read the statute , or read § 3937 in plain English, with its enforcement record .

Servicemembers sacrifice their liberty and at times their lives to protect the United States and our people, and the Department of Justice is determined to ensure that they receive all the benefits and rights that Congress provided to them under the Servicemembers Civil Relief Act.

Who was covered

Borrowers on retail installment contracts serviced or owned by the Conn defendants from March 22, 2014 to the date of the complaint who asked for the SCRA rate cap. The consultant's review counts a contract as qualifying when the borrower supplied proof of service within 180 days after military service ended: a copy of orders for requests made before August 13, 2018, and orders or any other appropriate indicator of military service, such as a commanding officer's letter, for later requests (consent order paragraphs 18 and 19).

What the settlement paid

• Before the order, Conn's self-identified 185 accounts handled incorrectly from March 22, 2014 through May 31, 2019 and issued $59,216.12 in refund checks and $28,586.89 in account credits (consent order paragraph 13).
• An independent consultant, paid by Conn's, had to re-review every rate-cap request in the period, including the accounts Conn's had already checked, and report within eight months of entry (paragraphs 14 to 17). Each borrower it finds shorted gets $500, whether the benefit was partly applied or denied outright, plus a refund or credit of all interest and fees above 6 percent not already returned (paragraphs 21 and 22).
• Checks left uncashed for six months are credited to the borrower's open Conn's account, the highest-rate one first, or reported under state unclaimed property law (paragraphs 25 and 26).
• $50,000 to the United States Treasury (paragraph 28), requests to all three major credit bureaus to modify or delete negative credit entries (paragraph 27), and a three-year order requiring eligibility decisions on every contract a borrower holds within two billing cycles.

Why this case matters

Store credit counts. A 21 percent furniture contract signed before service gets the 6 percent cap the same way a credit card does, and this was the first time DOJ took that point to a retailer. The detail most people miss is the start date: for Guard and Reserve members the cap runs from the day orders arrive, not the report date, and Conn's computed it from the wrong one. Fees count too, which is why a $189.28 extension fee appears in the complaint as interest.