Veterans whose tax refunds and benefits were withheld by the U.S. government will be repaid $7.4 million under settlement terms of a class-action lawsuit that questioned the government’s collection tactics. A total of 6,715 veterans will receive approximately $10,000 each. A federal judge in San Francisco approved the settlement.

Filed in 2007, the case was brought on behalf of disabled Army veteran Julius Briggs, who in 1993 spent $1,857 for on-base purchases – including uniforms - using his military credit card. Briggs stopped receiving billing statements and lost track of his card debt after he left the service. The U.S. Treasury ultimately withheld $2,373 from his income tax refunds for the delinquent debt.

A key issue was the government’s “administrative offset” practice of intercepting certain federal payments, including income tax refunds and Social Security benefits, to pay other debts owed to the U.S. Briggs’ attorney argued that the debt incurred had reached the 10 year statute of limitations for the offset program before the government began withholding income tax refunds in 2004.

Other veterans joined the class action, complaining that the Army and Air Force Exchange Service, which grants credit to military members for on-base purchases, miscalculated interest and fees and failed to send proper notices after they left the military. Many more then alleged that the offset was used after the statute of limitations had passed.

According to the Wall Street Journal, the case is among the first class actions ever to challenge the debt collection tactics of a federal agency. A spokesperson for the Justice Department, which handled the case, declined to comment on the settlement.

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