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Members of the military may be the pride of their communities, but debt collectors lean on them to pay up, causing great stress on them and their families, a government consumer watchdog agency says.

Military members lodged more than 19,000 financial complaints in 2015 with the Consumer Financial Protection Bureau, up from 17,000 the previous year, with almost half dealing with debt collection.

One issue … is the concern that unpaid debts can threaten a military career.

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Service members filed complaints about debt collections almost twice as often in 2015 as the general population did, the CFPB says in a report.



Threat to a military career

Debt collection complaints totaled more than 46% of all complaints by service members, the CFPB’s report says: “While this could be due to a variety of factors, one issue … is the concern that unpaid debts can threaten a military career.”

ACA International, a trade group representing debt collectors, questions the report’s accuracy. “It simply does not provide important and relevant details, including the actual data, methodology or supporting arguments,” says Cindy Sebrell, ACA vice president of public affairs.

The trade group criticizes the agency for issuing the report with complaint data that have not been verified. “The CFPB report itself acknowledges that the number of debt collection military complaints could be caused by a variety of factors,” Sebrell says.

‘Targeted by bad financial actors’

Even so, Ira Rheingold, executive director of the National Association of Consumer Advocates, says the bureau’s findings come as no surprise. The industry is plagued by poor record retention. “The debt collector/debt buyer industries continue to be out of control,” Rheingold says.

Service members are relatively young, uneducated and unsophisticated about debt, and failure to pay debts can end their careers.

“It’s a toxic mix — out-of-control debt collectors and particularly vulnerable service member consumers,” Rheingold says.

Holly Petraeus, the CFPB’s assistant director for service member affairs, says predatory lenders continue to spring up around military bases. On a visit to the Fort Campbell Army base a year and a half ago, she counted 20 fast-cash lenders in a 4-mile stretch.

“Service members can be targeted by bad financial actors,” Petraeus says. “The realities of military life, such as deployment or frequent moves, can also make service members particularly vulnerable.”

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Top 3 complaints

The CFPB outlined problems in many financial areas, but the most complaints came in 3 areas:

  1. Debt collection: About 44% of the bureau’s debt collection complaints from service members involved attempts to collect debt that the service members believed they didn’t owe.

    “Veterans are often left stressed and worried about their credit report due to these potentially erroneous collections,” the report says.

    In particular, the agency routinely hears from veterans who struggle with collectors on debts stemming from medical bills.

    “Many veterans leave the hospital believing their services were covered by their (Veterans Affairs) health insurance or Medicare/Medicaid, only to be hounded later by debt collectors,” the report says.

    Only 1% of the complaints about debt collection were closed with monetary relief. A majority of the cases — 66% — were closed with an explanation that was tailored to the individual consumer’s complaint. For example, this category would be used if the explanation substantively meets the consumer’s desired resolution or explains why no further action will be taken.

  2. Mortgages: Around 2,800 complaints covered home financing.

    Service members experienced servicing issues when they had to relocate from one base to another, the report says.

    Some complaints center on the Department of Veterans Affairs Home Loans program, which guarantees the loan with the lender. Veterans are charged a funding fee of 1.25% to 3%, but those disabled veterans with service-connected disabilities are not obligated to pay the fee or can have it refunded.

    “We often hear from our disabled veteran consumers that they are struggling to receive a refund,” according to the report.

  3. Credit reporting: Of approximately 2,200 credit reporting complaints from military members, 72% involved incorrect information on their credit reports. They usually learned of the problem after returning home from deployment and checking their credit report. Sometimes, the issue can be much more serious than just a mistaken listing on a credit report.

    “Many active-duty service members who submit credit reporting complaints highlight issues with fraud and identity theft,” the report says. “They often struggle to rectify the situation with both their creditors and the credit reporting companies.”

Other financial problem areas

The agency also received veterans’ complaints on consumer loans, bank accounts and services, credit cards, payday loans, student loans, prepaid cards, money transfers and other financial services complaints.

The majority of complaints in the financial services category — 50% — involved accusations of fraud or scams, the report says. Another 26% dealt with excessive or unexpected fees, while 8% involved issues of disclosure or lost or stolen checks.

With credit cards, the largest percentage of complaints — 15% — centered on billing disputes. The CFPB says service members complain that they are confused and frustrated by the billing process and by their limited ability to challenge inaccuracies on their monthly statement.

Service members lodged 500 payday loan complaints, with 51% dealing with fraud or scams. Debt collection complaints about payday loans outnumbered debt collection complaints about auto loans, mortgages, and student loans combined, the CFPB says.

“The cost and structure of a particular (payday) loan can make it difficult for service members to repay,” the report says.

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