RALEIGH -- A company that set up shops near military bases and targeted North Carolina military consumers with unfair practices now has to forgive debts and pay refunds, Attorney General Roy Cooper announced in a press release.
“Military servicemembers work hard to protect our country, but unfortunately their steady paychecks can make them targets for shady practices,” Cooper said.  “We won’t tolerate unscrupulous businesses that take advantage of military consumers in North Carolina.”

Cooper today joined the Virginia Attorney General’s Office and the Consumer Financial Protection Bureau (CFPB) to file a complaint and judgment in federal court in Virginia against Freedom Furniture, Inc., Freedom Acceptance Corporation (FAC), Military Credit Services, LLC (MCS) and owners John F. Melley and Leonard B. Melley, Jr. for violations of state and federal laws on credit and debt collection.   

Freedom Furniture is a national retailer that sells furniture, electronics, jewelry and other products online and at 14 retail locations near military bases, including one in North Carolina near Fort Bragg in Fayetteville.  FAC services credit and collects debts on behalf of Freedom Furniture, and MCS extends credit for purchases made by military consumers at independent retailers. 

Under the judgment, Freedom Furniture, FAC and MCS will pay more than $2.5 million in consumer relief and $100,000 in civil penalties.  Consumer relief includes $2.2 million in debt forgiveness and $373,279.06 in refunds for consumers who had default judgments entered against them in court as a result of the debts. 

In North Carolina, 311 affected consumers including around 180 servicemembers will receive approximately $234,000 in refunds and debt forgiveness.  The defendants must also adjust the amount owed by consumers with the credit reporting agencies.  Eligible consumers will receive their refunds directly from the CFPB.

The consumer relief aims to repair the damage done by the defendants to consumers’ finances and credit, as outlined in a complaint filed today along with the judgment.  When a servicemember purchased an item from Freedom Furniture, the company usually set up a monthly draft from the consumer’s paycheck, or military allotment for servicemembers.  Consumers were also required to provide a backup method of payment in case their allotment stopped or wasn’t enough to cover the monthly draft.  For many servicemembers, this backup method was a spouse’s or parent’s credit or debit card. 

The investigation revealed that FAC and MCS often double billed customers for monthly payments.  FAC and MCS tried to forecast when customers’ military allotments would stop or be insufficient to cover the payment owed and then used the backup payment method instead.  The information the companies used to make their prediction wasn’t always reliable, yet FAC and MCS went ahead with collecting backup payments.  That resulted in some consumers paying double the amount owed in a single billing cycle, and some paid overdraft fees as well. 

According to the complaint, FAC and MCS collectors sometimes contacted servicemembers’ commanding officers about their debts, which could harm their opportunities for promotion.  They also routinely filed lawsuits in Virginia courts against North Carolina consumers, even though state law requires that debt collection suits be brought in the county in North Carolina where the debt occurred.

In addition to the $2.5 million in relief for previous consumers, the judgment includes protections for consumers from future harm.  Under the judgment, the defendants are barred from:

Filing lawsuits against consumers in courts outside of the consumer’s county of residence or the county where the debt was incurred;

Charging any third party accounts such as credit or debit cards without written consent;

Collecting payments from backup accounts before payments are actually due and without notice;

Garnishing North Carolina consumers’ wages;

Contacting friends or family members about a consumer’s debts; and

Contacting a servicemember’s chain of command about a debt.

“Most businesses in military communities want to do right by servicemembers and their families, but some bad apple businesses don’t do things the right way,” Cooper said.  “It’s important that we educate servicemembers about fraud and let them know our office is here as a resource.”

Cooper’s Consumer Protection Division fights unfair business practices.  Military personnel and their family members can file a consumer complaint with the Attorney General’s Office by calling 1-877-5-NO-SCAM toll-free within North Carolina or filling out the complaint form at www.ncdoj.gov.  Cooper’s office has also put together a guide for military consumers, available at ncdoj.gov/military.aspx and distributed to military installations statewide.