This article was co-published with The Washington Post.
Money was tight, and neither Aguirre, 21, nor his wife had much credit history as they settled into life at Fort Carson in Colorado in 2010.
That's when he saw an ad for USA Discounters, guaranteeing loan approval for service members. In military newspapers and magazines, on the radio, and on TV, the Virginia-based company's ads shout, "NO CREDIT? NEED CREDIT? NO PROBLEM!" The store was only a few miles from Fort Carson.
"We ended up getting a computer, a TV, a ring, and a washer and dryer," Aguirre said. "The only thing I really wanted was a washer and dryer."
Aguirre later learned that USA Discounters' easy lending has a flip side. Should customers fall behind, the company transforms into an efficient collection operation. And this part of its business takes place not where customers bought their appliances, but in two local courthouses just a short drive from the company's Virginia Beach headquarters.
"They're basically ruthless," said Army Staff Sgt. David Ray, who was sued in Virginia while based in Germany over purchases he made at a store in Georgia.
Timothy Dorsey, vice president of USA Discounters, said the company provides credit to service members who would not otherwise qualify and sues only after other attempts to resolve debts have failed.
As for the company's choice of court, he said it was "for the customer's benefit." In Virginia, the company isn't required to use a lawyer to file suit. USA Discounters' savings on legal fees are passed on to the customer, he said.
"This company is committed to ensuring that the men and women who serve and sacrifice for our country are always treated with the honor and respect they deserve," Dorsey said.
The federal Servicemembers Civil Relief Act, or SCRA, was designed to give active-duty members of the armed forces every opportunity to defend themselves against lawsuits. But the law has a loophole; it doesn't address where plaintiffs can sue. That's allowed USA Discounters to sue out-of-state borrowers in Virginia, where companies can file suit as long as some aspect of the business was transacted in the state.
The company routinely argues that it meets that requirement through contract clauses that state any lawsuit will take place in Virginia. Judges have agreed.
"This looks like somebody who has really, really researched the best way to get around the entire intent of the SCRA," said John Odom, a retired Air Force judge advocate and expert on the SCRA.
For Lenders, Gaps in Federal Law Make Suing Soldiers Easyby Paul Kiel, ProPublica, July 25, 2014
Courts are required to appoint attorneys for service members if they are sued and can’t appear. But the law says little about what those lawyers must do. Some companies have taken advantage. More »
Consumer advocates say the strategy cheats service members who may have valid defenses. It's "designed to obtain default judgments against consumers without giving them any real opportunity to defend themselves," said Carolyn Carter of the National Consumer Law Center.
To investigate USA Discounters' practices, ProPublica reviewed 70 of the company's contracts for service members and non-military borrowers, all of which had been filed in court. A reporter also identified 11 recent court cases against active-duty service members to examine their treatment.
The same courts in Norfolk and Virginia Beach are favored by two similar companies headquartered in the area - Freedom Furniture and Electronics and Military Credit Services - that offer high-priced credit to military clientele. Together with USA Discounters, the three companies have filed more than 35,000 suits since 2006.
Officials with Freedom and Military Credit Services did not respond to repeated phone calls and e-mails.
USA Discounters opened its first store in 1991 in the Hampton Roads metropolitan area, where more than 70,000 military personnel are stationed.
Many sailors start their careers at the sprawling Naval Station Norfolk, "bringing their pay and their naiveté," said Dwain Alexander, a senior civilian attorney with the Navy in Norfolk.
USA Discounters, which is privately owned, now has 31 locations, including seven free-standing jewelry stores that go by the name Fletcher's Jewelers.
While the company does not exclusively lend to service members, it has a location just a short drive from each of the country's 11 largest military bases.
The company's showrooms are packed with bedroom sets, TVs and tire rims, but that's not the main draw. "You're not selling the furniture. You're not selling the appliances," said one former sales employee. "You're selling our financing program." The former employee, and others quoted in the story, spoke on condition of anonymity because they feared USA Discounters could adversely affect future employment.
Younger soldiers such as Aguirre are drawn in by the guaranteed credit - something not offered by cheaper big-box stores. "A lot of the time, this would be the first time they get a paycheck over $1,000," said a former store manager.
The company can confidently extend credit to such customers, former employees said, because the loans are almost always repaid through the military's allotment system. Part of the service member's paycheck automatically goes to the company every month.
On top of these costs, the loans typically are layered with fees for a warranty and a program that cancels the debt under certain circumstances. The plans are optional, but are included on the vast majority of loans, former employees said.
Dorsey, the USA Discounters executive, said the company's cost of purchasing goods was higher than big-box retailers with greater buying power. As for the add-ons, he said they are clearly disclosed as optional. The company's typical interest rate is "less than 20 percent," he said.
The final tally on the loans can be staggering for some young service members. In 2009, Army Pvt. Jeramie Mays, then 26, walked into the USA Discounters near Fort Bliss in Texas to buy a laptop before being deployed to Iraq. He chose a model that typically retailed for $650. At USA Discounters, it sold for $1,799. On top of that came $458 in add-ons. After another $561 in interest charges, Mays walked out owing $2,993 in payments over 23 months, according to a copy of his contract.
For Aguirre, it was only later, when he and his wife tried to get their finances under control, that he realized just how much he owed. The total loan amount is clearly listed on all USA Discounters' contracts, but customers often don't grasp how long they'll be paying, said a financial counselor who advises soldiers and sailors.
The military generally provides credit counseling for young service members. But for some, the allure is too great, particularly when the companies bill themselves as military friendly. "After the horse is out of the barn, there's not a lot you can do about it," said Lynn Olavarria, the financial readiness program manager at Fort Bragg in North Carolina.
Aguirre said he was told by his superiors that his struggles with debt have kept him from being promoted.
Late last year, after he had fallen far behind on his loan, he got a notice in the mail. USA Discounters was suing him in a Virginia court, more than 1,500 miles away. When he didn't show up, the company won a judgment of $8,626.
On every active-duty service member's contract ProPublica examined, just below various disclosures, it says the buyer "is subject to the jurisdiction of the state courts of the COMMONWEALTH OF VIRGINIA." To receive financing, customers must agree.
Such a demand is "abusive" and is not typically found in contracts involving consumers, said Carter of the National Consumer Law Center. The Federal Debt Collection Practices Act prohibits such suits if they are filed by a third party, such as a law firm. Because USA Discounters uses a company employee to file its debt collection suits, the law doesn't apply.
Dorsey said if customers ask to be sued elsewhere, the company will honor their requests, despite the contract. The clause is only included in the contracts of service members, according to ProPublica's review.
Gene Woolard, the chief judge of Virginia Beach General District Court, said under state law, the terms of a contract are binding.
If a defendant can't afford to travel to Virginia to contest a suit, "you can't do much about that," he said. And while he's sympathetic to debtors, Woolard said, "That's not a legal defense." Norfolk Chief Judge S. Clark Daugherty declined to respond to questions.
Court records show USA Discounters has obtained judgments in 89 percent of the suits it has filed in Norfolk's and Virginia Beach's courts since 2006.
Dorsey said the high success rate is to be expected - the customers owed money they hadn't paid. "[I]t is not surprising that they do not appear in collections proceedings in court - in any state in which we file," he said.
As for the federal law protecting active-duty service members, its requirements are easily met by USA Discounters. If a service member can't be located, the law requires a 90-day delay. Once that passes, the way is clear to obtain a judgment. If a service member doesn't appear in court, an attorney is appointed to represent the defendant. But the law does not specify what that lawyer must do.
In Virginia courts, the creditor can suggest the attorney to be appointed. USA Discounters appears to request the same lawyer for all its cases involving service members. In each of the 11 cases ProPublica examined, the court appointed Tariq Louka of Virginia Beach.
In response to written questions, Louka said that he represents "in the range of 300-400" service members each year. His primary duty, he said, is to inform his clients they have a right to request a delay, which he does by mail. "MY ONLY OBLIGATION IS TO REVIEW YOUR RESPONSE AND REQUEST AN ADDITIONAL STAY OR CONTINUANCE IF I FEEL IT IS APPROPRIATE GIVEN YOUR ANSWERS," his letters say in capital letters.
USA Discounters said that it had no business relationship with Louka or his firm.
Armed with judgments, creditors can attempt to garnish borrowers' wages or bank accounts. As of January 2014, 230 service members were involuntarily paying USA Discounters a portion of their pay, Department of Defense data shows. Altogether, those service members have paid more than $1.4 million to the company.
Next on the list of most active creditors were the two other local companies, Military Credit Services and Freedom, which together had seized the pay of 92 service members for a total of $289,000 as of January, according to the data.
USA Discounters also aggressively pursues funds in service members' bank accounts. Mays, the Army private who signed the nearly $3,000 contract for a laptop, said he initially stopped payment after the computer broke in Iraq. But other financial pressures, mainly costs associated with the care of his disabled mother, eventually made him decide to file for bankruptcy, he said.
Before he could, he was deployed to Germany and Afghanistan.
USA Discounters brought suit against him while he was in Germany. After winning a judgment, he said, the company sought to seize both his pay and funds in his credit union account. The action froze his account for several weeks, Mays said.
Mays, currently based at Joint Base Lewis-McChord in Washington state, said that for most of last January, he could not withdraw funds. "Trying to take care of two kids and my mother and myself on nothing doesn't help," he said. Around the same time, he finally filed for bankruptcy. His debt with USA Discounters was discharged last March, protecting any assets from seizure.
Dorsey of USA Discounters declined to respond without written, signed waivers from customers. Reached recently, Mays said he was in training and would not have an opportunity to provide a waiver. Other USA Discounters' customers either had their waiver rejected as incomplete by the company or could not provide one because of personal circumstances.
In Virginia, court judgments on debts can remain in force for decades. Court records show USA Discounters pursues debts for years, regardless of whether a service member has retired, or where he or she might live.
While in the Army, Sgt. LaShonda Bickford and her then-husband racked up an enormous debt with the company. After they fell behind, USA Discounters won a judgment in Virginia for $15,747. The 2011 judgment has continued to grow at the contract's interest rate of 18 percent, as Virginia law allows, and by late 2013, the debt stood at $21,291.
Every two weeks, USA Discounters gets about a quarter of her paycheck from a medical transport company, which pays Bickford about $27,000 a year. What's left barely supports Bickford, now divorced, and her 6-year-old son.
"It's a stretch to do everything I need to do every month," she said. Assuming the garnishment continues, Bickford has at least three more years of stretching ahead of her. "It's hard, it really is."
Have you been sued over a debt? You can help our reporting by filling out our questionnaire or email firstname.lastname@example.org.