America reveres its military servicemen and women, but it doesn’t spare them from aggressive debt collectors working from incomplete information and a sloppy understanding of the law. In just eight months, thousands of veterans and active members of the U.S. armed forces have filed complaints over erroneous and harassing debt collection attempts, according to a new report from the Consumer Financial Protection Bureau’s (CFPB) Office of Servicemember Affairs (OSA).
Out of more than 14,000 total complaints to the OSA since the agency began accepting filings in mid-2011, about 20 percent relate to debt collectors. Considering that the CFPB only started to accept debt collections complaints in July of 2013, that ratio suggests that debt collection is a disproportionately common problem for military families as compared to other financial industry abuses. The only category of complaint more common in the OSA report is problems related to a mortgage, which make up a third of the total. But the agency has been soliciting mortgage complaints since the end of 2011, nearly three times as long as the group has tracked reports of debt collector abuses.
Nearly two out of five of the roughly 3,800 separate debt collection complaints submitted to the OSA in that eight-month stretch involved collections agents pursuing “phantom debts” that servicemembers did not in fact owe. Another fifth related to the collectors’ communication tactics.
Debt collectors are widely reviled for their pattern of harassing debtors and issuing threats of costly legal action or even involving a borrower’s employer in the process. The industry is just as coercive toward members of the armed forces, according to the OSA report. “I have heard in my many visits to military installations across the country about aggressive and deceptive tactics by debt collectors specifically targeting members of the military,” writes OSA head Holly Petraeus in a letter introducing the report. “These tactics to coerce payment often involve contacting a servicemember’s military chain of command, threatening punishment under the Uniform Code of Military Justice, threatening to have a servicemember reduced in rank, or threatening to have a servicemember’s security clearance revoked.”
The industry’s reputation for bullying people is part of what drew the CFPB’s attention, and the OSA report is just one part of the agency’s attempt to crack down on a species of companies that has thrived for decades in what the New York Times calls a “regulatory void.” Hard economic times have put more and more people in the path of unscrupulous collections companies, many of which buy debts second-hand for pennies on the dollar in the hopes of badgering customers into coughing up enough of a payment to make the purchases pay off. One in seven Americans was pursued by one of these third-party collectors in 2012, far more than prior to the recession. They are far removed from the original circumstances of the borrowing and are often working from incomplete or inaccurate records, which is where a lot of these “phantom debts” come from. Given how widely credit scores are used for things like job applications, the damage that irresponsible, sloppy debt collectors do to their victims can doom them financially.
Veterans have a hard enough time financially without debt collectors adding obstacles. Post-9/11 veterans have a 10 percent unemployment rate, far above the overall jobless rate. Nearly a million working-age veterans lived in poverty in 2010, and tens of thousands are homeless. For the 900,000 military servicemembers who are on food stamps, spending cuts in Washington have left less money to fill the fridge.