Veterans, military families most at-risk for deceptive debt collectors

Charlene Crowell | 5/27/2016, 9 a.m.
When it comes to consumer concerns, debt collection remains the top complaint most often reported to the Consumer Financial Protection ...
A soldier observes a scenic view while waiting for a heavy equipment drop during a joint forcible entry exercise at Donnelly Training Area near Fort Greely, Alaska, June 7, 2014. (U.S. Army photo/Sgt. Eric-James Estrada)

When it comes to consumer concerns, debt collection remains the top complaint most often reported to the Consumer Financial Protection Bureau (CFPB). Two newly released CFPB reports reveal which consumers are most at risk and the businesses most often identified in debt collection issues.

As of March 1, CFPB found that California, Florida, Illinois, New York and Texas account for more than 40 percent of all complaints received since July 2011. Further, in Florida, nearly 60 percent of the state’s entire complaints came from just three metro areas— Miami, Orlando and Tampa Bay.

Still, military members and their families remain the most at-risk in debt collections, even when compared to the general population. Among all complaints received from the military community, debt collection represents almost half— 46 percent— of all military complaints filed. By comparison, all debt collection complaints CFPB received during the reporting period amounted to approximately 26 percent.

Mortgage complaints from military families, was the second ranked lending issue, at 15 percent. Service members returning home from deployment or to temporary duty stations also frequently reported fraudulent activity on their credit report and/or identity theft.

San Diego-based Encore Capital Group and Portfolio Recovery Associates (PRA) Group based in Virginia are two of the largest debt collectors in the country have been identified the most often in CFPB’s complaints. Each firm averaged over 100 complaints per month to the Bureau from October through December 2015.

Last fall, CFPB also took respective enforcement actions against the firms for their deceptive tactics involving both debt buying and debt collection. PRA was assessed an $8 million fine, ordered to refund $19 million to consumers and to stop collection efforts on other debts valued at $3 million. Similarly, Encore Capital was ordered to stop collection efforts on $125 million in debts, refund consumers $19 million and pay a $10 million fine.

Commenting on the disproportionate number of military complaints with debt collections, Holly Petraeus, Assistant Director for CFPB’s Office of Service Member Affairs said, “While this could be due to a variety of factors, one issue which we have highlighted in the past is the concern that unpaid debts can threaten a military career. Because of this, we encourage all service members to diligently check their credit reports and proactively protect their credit files while they are away from home.”

The Consumer Financial Protection Act of 2010 makes it illegal for businesses to:

•Contact service members’ commanding officers regarding unpaid debt;

•Disclose service members’ debts to commanding officers; or

•Characterize debt delinquencies as military violations subject to service members’ disciplinary actions.

Despite these legal protections, egregious problems persist. CFPB has brought actions over the past year against businesses that continue to violate its rules. For example, the Ohio-based auto lender, Security National Automotive Acceptance Company (SNAAC) was ordered in 2015 to refund or credit $2.28 million to service members and other consumers who were harmed by the firm. In addition, SNAAC was also assessed a $1 million penalty, and ordered in a separate district court action to stop using aggressive tactics to coerce service members into making payments.