WASHINGTON - One day a mobile phone giant, the next day a furniture store catering to military service members.

The Consumer Financial Protection Bureau on Thursday continued its crackdown on an array of businesses, joining two attorneys general in fining the Virginia-based furniture retailer Freedom Stores and its affiliates for how they collected consumer loan payments from military service members.

The retailer - also known as Freedom Furniture and Electronics - as well as Freedom Acceptance Corp. and Military Credit Services agreed to settle charges of debt collection tactics including lawsuits filed for out-of-state contracts, unauthorized debits and contacting service members' commanding officers about outstanding loans.

The companies and their chief executives, John Melley and Leonard Melley, Jr., have agreed to offer $2.5 million in debt relief to affected consumers and pay a $100,000 penalty. The CFPB brought the action jointly with the AGs in North Carolina and Virginia.

"Our nation's servicemembers deserve better than to be targeted with illegal collections tactics when they are struggling to pay their bills," said CFPB Director Cordray in a press release. "Today's action sends a clear message that the consumer bureau will continue to aggressively defend the rights of servicemembers and all consumers."

While the action was focused on debt collection - in which the CFPB has an established record - the settlement with the retailer came a day after the bureau took action against another nonfinancial entity: Sprint Corp. The agency on Wednesday filed suit against the mobile service provider for allegedly allowing third parties to charge unauthorized fees.

Freedom Stores has locations nationwide near military bases and offers credit to consumers who purchase its goods ranging from furniture electronics to jewelry to even car rims. The store then transfers the finance contracts to affiliate Freedom Acceptance. The third affiliate, Military Credit Services, finances purchases at more than 300 independent consumer goods retailers.

The CFPB and state AGs said Freedom Acceptance and Military Credit Services had filed more than 3,500 lawsuits in Norfolk, Va., against customers who did not live in the state, had signed contracts somewhere else and therefore found it difficult to appear in court. In some cases they were unaware a suit had been filed. The lawsuits were filed between July 2011 and December 2013.

The CFPB said nearly all of the lawsuits resulted in default judgments, leading the companies to garnish the debtors' wages or place liens on their bank accounts, sometimes without their knowledge.

"This settlement resolves serious charges that Freedom Furniture engaged in abusive, harassing collection practices against Virginia veterans and servicemembers while also misusing Virginia courts to go after consumers who neither live nor do business in Virginia," said Virginia Attorney General Mark Herring in a press release. "Our joint action will restrict such practices in the future, provide significant relief to those who have been wronged, and send a clear signal that we will aggressively pursue businesses that abuse Virginia consumers, especially any that prey on veterans and servicemembers. The Commonwealth of Virginia and our courts will not be a safe harbor for unfair and abusive practices."

Among a handful of allegations, Freedom Acceptance and Military Credit Services were also accused of "double-dipping" in service members' accounts for payment.

Service members typically set up their credit payments to be taken out through military allotment but the Freedom companies also required customers to authorize withdrawals from a bank account as a backup. The CFPB charges that the companies relied on a payment processor that sometimes had incorrect reports and so it would take payments from both the servicemembers' pay check and bank account in the same month, often before the due date.

As a result, servicemembers would have to pay surprise overdraft fees and other charges, the agency said. The companies were also accused of hiring debt collectors who withdrew funds from checking accounts and credit cards of customers' parents, significant others or other individual tied to the debtor without prior authorization or notification.

"Military servicemembers work hard to protect our country, but unfortunately their steady paychecks can make them targets for shady practices," said North Carolina Attorney General Roy Cooper in the press release. "We won't tolerate unscrupulous businesses that take advantage of military consumers."

In addition, the two finance companies had a clause in the contracts that allowed them to contact the commanding officers of the service members about their debt.

"The companies would contact the officers in writing and by phone to disclose the debts, humiliating the servicemembers and putting their careers at risk," the CFPB said. "For members of the military, consumer-credit problems can result in disciplinary proceedings or lead to revocation of a security clearance."

This is the second action this year that the CFPB has taken against a retailer that extends credit to the military. The first was a smaller settlement with USA Discounters, which agreed to pay $400,000 in relief to affected service members for allegedly charging customers for services never provided or legal protection to which they were already entitled.

"The CFPB has had a special focus on companies that operate in the military community since its 2011 founding, which led to the inquiry regarding Freedom Stores," said Freedom Stores in an emailed response. "We support the Bureau's efforts to root out bad actors in this space, but by the CFPB's own admission, the complaint against Freedom Stores, 'is not a finding or ruling that the defendants have actually violated the law.'"

In the agency's consent order pending court approval, Freedom Stores and its affiliates have been barred from specified activities and are subject to monitoring by the CFPB, in addition to paying the restitution and penalties.

The company said it has "voluntarily agreed to forgive more than two million dollars in loans and provide more options regarding where default litigation will be conducted."

Freedom Stores also plans to improve "efforts to educate customers on money management fundamentals" among other steps, the company said.

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