How to Deal with Debt Collectors While in the Military

Nobody wants to hear from a debt collector. It’s unnerving and can be a cause of anxiety.

If you’re in the military, debt and debt collection issues can put your status, promotions and career at risk.

So it’s never wise to ignore legitimate debt collection calls. Note the word legitimate. It’s important to ensure any debt collection is about a legitimate debt that you owe.

Everyone has rights when dealing with debt collectors. Military debt collections laws have been written to help servicemembers. These laws can help offer protection from predatory collectors.

The Fair Debt Collections Practices Act passed in 2021 forbids debt collectors from harassing, oppressive or abusive actions. Collections agencies are not permitted to tell the chain of command about your debt, threaten you with prosecution under the Uniform Code of Military Justice or threaten an action they are not allowed to pursue, like revoking a security clearance or having you demoted.

Another bill that has passed the U.S. House of Representatives and awaits action in the Senate is the Fair Debt Collection Practices for Servicemembers Act. Sponsored by Rep. Madeline Dean of Pennsylvania, the act offers further protection for servicemembers from debt collectors.

“Our servicemen and servicewomen make extraordinary sacrifices on our behalf. The last thing they need is harassment from manipulative debt collectors who take advantage of their service,” Dean said in a statement released by her office.

Knowing and understanding your rights can make a difference in protecting yourself and your career.

We will take a look here at what servicemembers need to know about debt and the debt collection process.

What Are Your Rights During Debt Collections?

Every servicemember who receives a debt collection call should always seek the following information:

• The name of the person calling
• The name of the collection company
• The company’s address and phone number
• The balance due on the debt
• Who is seeking payment, i.e., the creditor
• The means by which you can dispute the debt or verify that the debt is truly yours

You are entitled to all the information. Verifying the above will help ensure that the debt is legitimate.

If the person on the other end of the phone balks or is reluctant to share this information, ask for it in writing. Receiving written notice will help clear up hazy issues – and scare away unscrupulous collectors or scammers. It’s always a good idea to get the information in writing before agreeing to pay the debt or negotiating a payment plan.

Another key step is identifying the debt. How does that work?

• See if you recognize the debt. If you do, contact the debt collector and try to work out a payment plan that fits your budget and satisfies the collections agency.
• If it’s old debt, consult the local Judge Advocate General (JAG) office to see if the statute of limitations on collections has run out. If it has, the creditor cannot file suit to collect. Your JAG Legal Assistance Office can be found
• If the debt isn’t yours, dispute the debt and tell the collector not to call anymore

Hearing from a debt collector can be disconcerting. However, everyone has rights. A debt collector may not harass you with repeated phone calls. The collector may not use profanity, swear at you or threaten you. And any mention of violence or physical harm is forbidden.

Servicemembers have additional rights. The debt collector cannot notify your superior officer of your debt. They may not threaten you with prosecution via military tribunal, and they may not threaten an action they are not permitted to pursue, such as threaten security clearance or to have you demoted. All are empty threats designed to have you acknowledge the debt being discussed is yours, which leads to you paying it, whether you recognize it or not.

If you believe a debt collection agency is harassing you, you can submit a complaint to the Consumer Financial Protection Bureau. In 2020, 15% of CFPB complaints were about debt collections.

What Can’t Debt Collectors Do?

As we said above, there are many tactics that debt collectors can’t use to try to get you to surrender your money. Here are some things they can’t do:

• Set Timelines and Make Threats: Stay calm when dealing with debt collectors. They will often make threats and set timelines that make you feel helpless, but they don’t have any real power over you. You’re in control of this transaction, so be firm and confident when confronted by a collector.
• Harass You at Work: The Fair Debt Collection Practices Act clearly states that if you tell a debt collector to stop calling you at work, they have to comply with your request.
• Tell Others About Your Debt: Debt collectors can’t tell other people – your superiors, but also your friends and neighbors – about your debt unless they’re legally obligated to pay that debt. They can only contact third parties if they’re trying to locate you.
• Garnish Wages: Debt collectors cannot garnish your wages unless a court authorizes them to do so.
• Collect Expired Debts: Debt collectors cannot sue you or ding your credit report if you refuse to repay debts that exceed the statute of limitations. But beware, collectors do not need to tell you that the statute of limitations has expired on your debt, and if you make payments on an old debt, it can become collectible again.
• Improve Your Credit Rating: Once your debt has been sent to a collector, it will stay on your account for seven years, six months. Collectors might tell you that they will change your account to “paid in full” status, but it won’t help your credit score.
• Force You to Pay Deceased Relatives’ Debts: Collectors may try to get you to pay off the debt of a dead relative, but unless you co-signed for the money, it’s not your responsibility.

Remember that uncertainty is your enemy in dealing with debt collectors, so if you’re confused by what they’re saying or you’re upset, just pause and take some notes that will help you think clearly. You can also end the call and seek help from the base legal office or the local JAG office. Take your time, stay calm, and do not act impulsively.

How Does the SCRA Help Protect You from Collections?

The Servicemembers Civil Relief Act (SCRA) provides protections for servicemembers facing legal or financial complications while on active duty. The SCRA protects you from:

• Outstanding credit card debt
• Mortgage payments
• Pending court trials
• Taxes
• Lease terminations

The strongest of the protections offered can delay, change or even suspend financial or civil obligations for servicemembers on active duty and deployed. These could even apply to some loans and debts incurred before service began. The SCRA could cap interest rates on credit cards and mortgages, offer default judgments in some cases or prevent a home foreclosure.

Can Debt Collectors Contact Your Commander?

Debt collectors must follow a strict set of rules when it comes to dealing with your commanding officer. Though a debt collector can contact a third party to find a phone number or where a servicemember lives, they cannot call your supervisor or commanding officer about a debt – or even that you owe a debt – without your permission.

A debt collection agency or collector cannot have you demoted or affect your security clearance. If they say they can, they are breaking the law and trying to scare you.

The Department of Defense issued an instruction in February 2022 that further tightened the regulations. It reads: “Pursuant to the FDCPA, contact by a debt collector with third parties, such as commanding officers, for aiding debt collection is prohibited without a court order or the debtor’s prior consent given directly to the debt collector. Creditors are generally exempt from the FDCPA, but only when they collect on their own behalf.”

“These debt collection practices are manipulative and have negative career implications for soldiers, like contacting their superior officers or threatening rank reduction,” a statement from Rep. Dean’s office said. “And unfortunately, these practices do not stop with the service-member. Debt collectors also target military spouses – unfairly burdening our military families who have sacrificed so much.”

Even with these regulations, it’s important to work with debt collectors when debts are legitimate. If unpaid debts are reported to credit reporting agencies, there could be a negative impact to your credit worthiness. Hiding from legitimate debt is not a good idea.

This isn’t just a nice thing for servicemembers to do: It’s required.

The Department of Defense instruction states that servicemembers “are expected to pay their just financial obligations in a proper and timely manner” and adds that “whenever possible, indebtedness disputes should be resolved through amicable means.”

“Failure to do so damages their credit reputation, reduces their individual readiness, and affects the public image of all DoD personnel,” the instruction states.

Seek Support

Active-duty servicemembers would be wise to pursue interest rate reduction via the SCRA or the Military Lending Act (MLA). The SCRA caps rates at 6% per year and covers some loans incurred prior to the start of military service.

To qualify, you must send a creditor written notice and a copy of your orders or another appropriate indicator of service (a letter from a superior officer). The creditor then must forgive (not defer) interest greater than 6% on qualifying debt. Rates only apply while on active duty, and a servicemember must notify creditor within 180 days of active-duty service ending. The rate cap applies to active-duty service time, plus on additional year after the service ends.

The MLA caps predatory loans like payday loans at 36%. Yes that’s an exorbitantly high rate, which shows just how outrageously high the interest rate on payday loans can be. The MLA also helps with finance charges and other financial charges like application fees and fees for debt cancellation contracts.

For advice or help on all loans or debts, a servicemember could consult with the local JAG office to assess his or her rights.  The JAG Legal Assistance Office  locator is the easiest way to find help near you. A lawyer also could help you deal with debt collectors. A nonprofit credit counselor also could help implement a plan to pay down the debt, perhaps through debt consolidation.

Remember: You should not ignore legitimate debts that you owe, but as a servicemember you are entitled to certain protections and help that can aid in having the debt dealt with in the best way possible.