Over the past decade, U.S. involvement with the conflicts in Afghanistan and Iraq has led
to a large and sustained mobilization of
our country’s armed forces. Members of
the U.S. military have often been
deployed multiple times in dangerous
regions of the world, frequently enduring
extreme hardships while protecting
American interests abroad.
Lengthy deployments can be very
difficult for service members and their
families, both emotionally and financially.
Even after returning from active duty,
service members often experience
difficulties with reintegration, which may
include financial hardships and trouble
meeting financial obligations.
Collecting from this segment of
society requires a heightened level of
sensitivity to the unique circumstances
service members and their families may
be facing, as well as a thorough
understanding of the laws and special
protections afforded to them.
Of course, compliance with the Fair
Debt Collection Practices Act and state
debt collection laws are required when
collecting from any consumer, including
service members. In addition to the
FDCPA, two other federal laws, the
Servicemember’s Civil Relief Act and the
Military Lending Act, provide further
protections for service members. Debt
collectors must be aware of these special
legal requirements when collecting from
service members.
The CFPB and Service Members
Underscoring the importance of
compliant and ethical collection practices,
the Consumer Financial Protection
Bureau has shown an increased focus on
financial lending and debt collection
practices directed at service members.
The CFPB has established an Office
of Service Member Affairs, with a mission
to protect service members and their
families from unlawful acts and practices
and see that military personnel get the
financial education they need.
Holly Petraeus, assistant director of
the CFPB Office of Service Member
Affairs, has provided testimony before the
Senate Committee on Banking, Housing
and Urban Affairs, highlighting
complaints received from service
members about debt collectors and
creditors.
The testimony provided examples of
“aggressive and deceptive tactics” used by
debt collectors when working with service
members, including threatening
punishment under the Uniform Code of
Military Justice, threatening to have the
service member reduced in rank or
threatening to have the service member’s
security clearance revoked. While the use
such of tactics to collect from service
members is certainly not indicative of the
entire collection industry, it is important
to be aware of these concerns so proactive
policies can be put in place and collectors
can be trained properly.
The CFPB has the authority to
enforce the FDCPA, SCRA and MLA—
as well as supervise and examine certain
financial institutions—and it has been
actively flexing these powers.
Last year, the CFPB and Office of the
Comptroller of the Currency engaged in
a joint enforcement action against a
national bank as a result of “unsafe or
unsound” litigation collection practices
and efforts to comply with the SCRA.
The $389 million enforcement action
resulted in a 58-page consent order that
specifically addresses the requirements
the bank must follow when it works with
collection agencies and outside law firms
Military Matters: Compliant Collections
Collection agencies should have polices and procedures in place regarding service members’ accounts
By Laura Dadd
to collect on delinquent accounts and
their efforts to comply with the SCRA.
Moreover, the CFPB’s Advance Notice
of Proposed Rulemaking on debt
collection also includes questions
regarding collection from service
members. This is another strong
indication that this area is of particular
interest to the CFPB.
For example, one of the concerns
highlighted in the ANPR involving
service members covered contacting
consumers at inconvenient places, such as
military combat zones or other hazardous
duty postings.
The ANPR also touched on issues
involving service members’ credit
applications, communications with service
members’ spouses and providing false
information about laws that protect
service members.
One question specifically states, “The
bureau has heard reports of debt
collectors falsely stating that they will
have a service member’s security clearance
revoked and threatening action under the
Uniform Code of Military Justice if the
service member fails to pay the debt. How
prevalent are these threats?”
Questions such as this are an example
of the level of importance the CFPB is
placing on issues relating to service
members. The CFPB is collecting
complaints from service members, some
of which have even prompted
investigations. With the CFPB’s increased
focus on service members, it’s important
for collectors to understand the
protections the SCRA and MLA provide.
Servicemember’s Civil Relief Act
The SCRA was originally titled The
Soldiers’ and Sailors’ Civil Relief Act. It
was amended in 2003 and renamed the
Servicemember’s Civil Relief Act. The act
compliance
