This Retailer is Ordered to Pay $2.5 Million for Military Debt Collection

A furniture and electronics retailer is not the sort of company that you might normally expect to be involved in illegal debt collection activities. Nevertheless, this is exactly what one Virginia-based retailer that previously ran a store in Jacksonville has been accused of. As a result, the company is now required to pay over $2.5 million in restitution and a $100,000 civil penalty for illegal debt collection practices.

The company in question is Freedom Stores, Inc. (freedom Acceptance Corporation and Military Credit Services LLC) and is accused by the Consumer Financial Protection Bureau (CFPB) of using illegal tactics in the collection of debts, debiting consumers' accounts without authorization and filing of illegal lawsuits. They have also been accused of contacting the commanding officers of service members.

The CFPB Director Richard Cordray said the following in a press release:

“Our nation’s service members deserve better than to be targeted with illegal collections tactics when they are struggling to pay their bills. Freedom Stores and its affiliated companies were filing thousands of lawsuits in Virginia against consumers not from there, taking money from some consumers’ bank accounts without permission, and using the military chain of command to pressure and humiliate service members."

Freedom stored used to operate outside the gates of one Camp Lejeune from a store front that was found on Lejeune Boulevard. The store has been out of business since May 1st 2014 but according to the company's official website there are still 14 different stores located across the country.

Freedom Stores have issued a statement stating that they will be working to establish safeguards for customers in future and that they will have a 'blue ribbon internal advisory board' going forward, which will be comprised of former military personnel and 'other experts'. The hope is that this will guide decisions going forward to prevent further complaints and issues.

The complaint filed was not actually a finding or ruling that the company had been partaking in illegal activities or necessarily violated the law. Nevertheless though, the company has agreed to compensate some of its customers.

From the same statement:

Freedom Stores and its affiliated companies were filing thousands of lawsuits in Virginia against consumers not from there, taking money from some consumers’ bank accounts without permission, and using the military chain of command to pressure and humiliate service members. In addition, we are redoubling our efforts to educate customers on money management fundamentals through our online MoneySKILL course.”

In 2014 over 1,000 customers completed the course and received a $100 gift card in return. The company has 5,000 more customers scheduled to complete the course this year.

Action was taken against the company in December by the Attorney General of North Carolina and Virginia along with CFPB.

The North Carolina Attorney General Roy Cooper had this to say, painting a different picture of what happened:

"Military service members work hard to protect our country, but unfortunately their steady paychecks can make them targets for shady practices. We won’t tolerate unscrupulous businesses that take advantage of military consumers."

In an investigation, the CFPB states that it found the company and business owners John and Leonard Melley to have violated the Dodd-Frank Wall Street Reform and Consumer Protection Act by using illegal debt collection practices.

Freedom Stores was also found to be in violation of the Electronic Fund Transfer Act for not fully disclosing the terms of preauthorized transfers. Meanwhile, the Military Credit Services was in violation of the Truth in Lending Act as they neglected to include the terms or interest rates on the loans offered.

By the terms of the consent order that was filed in December, the company is now barred from any further violations and will be under close monitoring for any future malpractice by the CFPB.

Once again, this is paints a clear picture of the risks that many military personnel are exposed to. This is why it's so important to carefully research the companies that you deal with and this holds especially true when taking out loans or otherwise spending large amounts of money. When using military loans, it is usually advisable to use a company specifically tailored to military loans such as the US Military Lending Corp.