Service members and military families are submitting debt collection complaints at twice the rate of other consumers, the Consumer Financial Protection Bureau reported Tuesday.
The CFPB's annual report highlights complaints and enforcement actions that returned more than $5 million to service members and their families in 2015.
The CFPB has long been concerned that unpaid debts can threaten a military career. Military members complained to the bureau last year that debt collectors have contacted their commanding officers and even threatened their security clearances over debt issues.
"The [CFPB] will continue to closely monitor complaints from service members to ensure our brave men and women are getting the protection they deserve," said CFPB Director Richard Cordray. Roughly 44% of complaints about debt collectors involved debts that service members said they believed they did not owe, the bureau said. A frequent complaint from veterans had to do with collectors trying to collect debts on medical bills that should have been covered through their Veterans Administration health insurance.
The Dodd-Frank Wall Street Reform and Consumer Protection Act established the Office of Servicemember Affairs to address consumer protection concerns for the nation’s military. A priority for the office is to monitor the complaints sent to the CFPB by service members.Last year, the CFPB received more than 19,000 complaints from members of the military community. The top three most complained about products or services were debt collection, mortgages and credit reporting.
The CFPB is currently working on proposing rules for collectors that would require them to help consumer better understand the costs and risks associated with certain products and services.
Besides debt collection complaints, other specific financial issues service members complained about last year include:
- Mortgages: Service members submitted roughly 2,800 complaints related to mortgages. The most common type involved challenges faced when they were unable to make payments, including problems with loan modifications, collections and foreclosures. In particular, service members continued to experience servicing issues when they had to relocate following a permanent change of station order sending them from one base to another.
- Credit Reporting: Approximately 2,200 credit reporting complaints were submitted in 2015. The majority - 72% - involved wrong information on credit reports. Complaints about incorrect information often came after service members returned home from deployment or temporary duty stations to find fraudulent activity on their credit reports. When service members tried to fix the problem, they often had difficulty seeking a successful resolution with creditors.
The CFPB last year took four enforcement actions that particularly impacted service members and their families.
In October, the CFPB brought an enforcement action against Security National Automotive Acceptance Company (SNAAC), an Ohio-based auto lender, for engaging in abusive debt collection practices against service members and their families. In the action, SNAAC was ordered to refund more than $2 million to affected consumers.
In April, the CFPB ordered Fort Knox National Company and Military Assistance Company, a military allotment processor, to provide more than $3 million in redress for charging service members fees without providing the proper disclosures.
Also in April, the CFPB took action against RMK Financial Corp. for deceptive mortgage advertising practices when the company ran ads that led consumers to believe the company was affiliated with the U.S. government.
The CFPB also took action against NewDay Financial in February 2015, for deceiving consumers about a veterans’ organization’s endorsement of NewDay products, and for paying kickbacks for customer referrals. Through these actions, service members received more than $5 million in relief.