Freedom Furniture to Pay $2.5M in Consumer Relief

December 19, 2014  by in Furniture Retailing, Industry, Legal   

Freedom Furniture, along with its affiliates Freedom Acceptance Corp., Military Credit Services and the owners John Melley and Leonard Melley, is accused by the N.C. Attorney General of violating state and federal laws on credit and debt collection.

The judgment allows for consumer relief of $2.2 million in debt forgiveness and $373,279.06 in refunds for consumers who had default judgements entered against them in court because of the debts. In North Carolina, 311 consumers, many of them military service personnel, will receive about $234,000 in refunds and forgiveness.

Freedom Furniture will also have to adjust the amounts owed by consumers with the credit reporting agencies.

“Military service members work hard to protect our country, but unfortunately their steady paychecks can make them targets for shady practices,” said N.C. Attorney General Roy Cooper. “We won’t tolerate unscrupulous businesses that take advantage of military consumers in North Carolina.”

Cooper worked with the Virginia Attorney General’s office  and the Consumer Financial Protection Bureau on the case.

The relief will help repair damage done to consumers’ finances and credit. According to the complaint, when consumers bought from Freedom Furniture, the company typically set up a monthly draft from the consumer’s paycheck or military allotment for service members. Consumers were required to provide a backup method of payment in case the allotment stopped or wasn’t enough to cover the draft.

An investigation found that Freedom Acceptance Corp. and Military Credit Service 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 service members’ commanding officers about their debts. 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 service member’s chain of command about a debt.

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