Freedom Stores Inc., which operates under the names Freedom Furniture & Electronics, Military Credit Services LLC and Freedom Acceptance Corp., has been sued by the Colorado attorney general's office for violations of lending and consumer protection laws.
The lawsuit alleges that Freedom Stores took advantage of military personnel and their families by imposing unlawful collection practices and interest rates.
The complaint alleges that Freedom Stores repeatedly has violated Colorado law by charging excessive interest rates and fees on loans and using illegal collection practices, including contacting commanding officers of service personnel about unpaid debts.
The stores target military customers by advertising "instant credit approval for all active duty military and civil service employees," according to the attorney general's office.
The lawsuit seeks the refund of all loan finance charges and excess fees and seeks maximum fines and civil penalties for each violation. Freedom Stores CEO Leonard Melley Jr. could not be immediately reached for comment.
The Colorado attorney general's office said the company was ordered to correct the violations after a 2012 examination but continued the same business practices.
"We will stop any company that seeks to take advantage of military service members and the chain of command to unjustly profit from illegal lending schemes," state Attorney General Cynthia Coffman said in a statement.
Freedom Stores last December agreed to pay $2.5 million in a settlement following similar legal action by the Consumer Financial Protection Bureau and the attorneys general of North Carolina and Virginia.
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.In the CFPB's action, among a handful of allegations, Freedom Acceptance and Military Credit Services were accused of "double-dipping" in service members' accounts for payment.
Service members commonly 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 end up paying surprise overdraft fees and other charges, the CFPB said. The companies also were 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.