3 tactics debt collectors can’t use on military personnel

The Consumer Financial Protection Bureau, or CFPB, has taken steps to stop certain aggressive tactics that debt collectors have used to collect car loan payments from U.S. military service members.

In a June 2015 statement, CFPB Director Richard Cordray said service members shouldn’t “have their financial and career security threatened by false information from an auto loan company.”

The government protects the protectors

Federal law doesn’t expressly prohibit the tactics that have come under scrutiny, but service members have protections against practices that are unfair or abusive, says Lisa Stifler, policy counsel for the Center for Responsible Lending, a nonprofit in Durham, North Carolina, that works to combat predatory lending practices.

Here are 3 examples.

1. Repossess an active-duty service member’s car without a court order. The Servicemembers Civil Relief Act, or SCRA, protects active-duty service members in their financial dealings. Among its protections is a prohibition against repossessing a vehicle without a court order.

“Most times when repossession happens, it’s without a court order,” Stifler says. “With SCRA, you have to get a court order to do it.”

The law uses a broad definition of active duty, so many service members are covered by its protections.

2. Disclose a debt to a service member’s chain of command. Debt collectors aren’t allowed to disclose a debt to a third party or contact a third party other than to find out where the borrower is, Stifler says. Superior officers are third parties.

The CFPB has pointed out that a contract that purports to get such permission but buries the information, making it difficult or impossible for service members to read, understand or remove, is not a fair practice. Such unfair practices are prohibited, Stifler says.

3. Use an involuntary allotment to collect a debt directly from a service member’s pay without a court order. Service members can authorize voluntary direct withdrawals from a bank account for mortgage or rent payments, savings account deposits, investments, support of dependents or insurance premiums. But new allotments aren’t allowed for purchases of personal property, such as vehicles, furniture, appliances and electronics.

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What’s more, debt collectors can’t threaten to file a lawsuit against a service member to collect a debt with no real intention to do so. Again, the CFPB has indicated this to be an unfair or abusive tactic.

Service members don’t have to deal with wrongful debt-collection practices alone. Complaints can be brought to the state attorney general’s office, Department of Defense or CFPB Office of Servicemember Affairs, among other government agencies.