Certain types of debt collection activity against active duty soldiers and service members are illegal. That didn’t stop one retailer and two debt collection firms from partaking, according to the Consumer Financial Protection Bureau.
The agency pursued action against the companies after learning the firms engaged in illegal tactics in order to collect debts against active-duty service members. Those actions included filing lawsuits illegally, debiting consumer accounts without proper authorization and contacting the commanding officers of service members.
For these actions, the CFPB reports, a federal court judge issued a final consent order requiring the firms and their owners to pay $2.5 million in restitution, plus a $100,000 civil penalty.
The claims were against a retailer known as Freedom Furniture (or Freedom Stores), a furniture and electronics company that caters specifically to members of the U.S. military, and debt collection firms Freedom Acceptance Corp. and Military Credit Services. The firms’ debt collection actions reportedly ran afoul of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
According to a press release issued by the CFPB, those actions specifically included:
- Filing thousands of lawsuits illegally in the state of Virginia for contracts drafted out-of-state. Specifically, there were 3,500 legal actions taken against customers in Virginia, despite the fact that financing contracts weren’t signed there and defendants did not live in that state. Almost all resulted in default judgment against service members, who in turn had their wages garnished or liens placed on their bank accounts. Most didn’t realize they had been sued until their bank accounts were emptied.
- Double-dipping by collecting from both soldiers’ bank accounts as well as paychecks without the customers’ knowledge. This also caused soldiers to pay unexpected non-sufficient funds charges and overdraft fees.
- Illegally charging the credit cards or bank accounts of service members’ families and even friends. This was prompted when these individuals offered a one-time payment to cover for a service member. But the companies kept this information in their systems, and if the account went delinquent, would debit these other accounts unauthorized.
- Contacting service members’ commanding officers illegally, embarrassing the debtor and putting their military careers in jeopardy, as consumer-credit issues can sometimes result to a revocation of security clearance or disciplinary proceedings.
That action has been taken against these unethical firms is noteworthy. However, a $100,000 civil penalty is unlikely to deter companies from engaging in this type of action in the future. Many make millions doing the exact same thing. A $100,000 fine may be seen as the cost of doing business – assuming they get caught.
Unfortunately, our Miami consumer rights lawyers know these incidents are far from isolated to these companies.
Last year, journalism non-profit ProPublica published an investigation into the practices of a firm called USA Discounters, another retailer catering directly to military members. The Washington Post picked up the story as well, which detailed how the company wooed service members by guaranteeing them credit on electronics and appliances that were heavily marked up. When service members inevitably fell behind on payments, the company sued them. The firm followed the same modus operandi as the others, securing a default judgment and then garnishing wages and securing liens on property.
The CFPB has declined to say whether it is investigating USA Discounters, though an earlier settlement was reached with the firm regarding unrelated practices.
Following ProPublica’s earlier report, numerous senators sent letters to the CFPB urging them to take a harder line against companies who violate soldiers’ consumer rights.
If you’re battling debt collection in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.
Feds bar companies’ long-distance lawsuits against soldiers, Dec. 27, 2014, By Paul Kiel, ProPublica
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