May 9, 2014
How Military Members Can Avoid Illegal, Unfair Debt Collection Efforts
The Association of Credit Counseling Professionals – ACCPros – Offers Tips for Servicemembers With Student Loans and Other Debts
Members of the military face a host of enemies abroad: everything from terrorists and suicide bombers to inhospitable land and severe weather conditions.
Unfortunately, back at home, many U.S. servicemembers and their families must square off against a different kind of enemy: financial services firms and bill collectors that use aggressive, often illegal practices when trying to collect debts.
“The list of financial abuses that military families face is downright appalling,” says Judy Sorensen, president of the Association of Credit Counseling Professionals, ACCPros. “On a daily basis, many deal with harassing phone calls from debt collectors, predatory lending traps and wrongful foreclosures on their homes, not to mention widespread problems with student loans. This is the last thing our service men and women need after they’ve been out fighting for our safety and freedoms.”
To help combat these problems, Sorensen and the experts at ACCPros offer four tips to military members facing financial difficulties, especially with student loans.
Tip#1: Know your legal rights
“Part of the problem is that many U.S. servicemembers simply don’t know that they have various military protections to help them in areas such as their mortgages and student loans,” says Sorensen.
For example, under the Servicemembers Civil Relief Act of 2003, military members and their families are supposed to be protected from housing evictions. The Act also includes a stay of all court proceedings a bill collector might attempt, and a cap on loan interest rates, including a 6% ceiling on student loans.
Separately, the Military Lending Act caps payday loans and title loans at 36%.
Sorensen notes, however, that some payday lenders use loopholes to get around payday loan caps. She recently wrote about this abuse in an article on Credit.com.
Tip #2: Report abuses to the authorities
It’s not in your best interest to be silent about financial misconduct by any company with which you might do business. So Sorensen urges military members to report wrongful doing to the authorities, like the Consumer Financial Protection Bureau.
In April, the CFPB issued a report highlighting everything from dubious default judgments to wrongful debt collection activity against military members. The report concluded that more needs to be done to ensure that members of the U.S. armed forces receive the full protection of the law concerning their financial affairs.
That’s one reason the CFPB does track complaints. In fact, the agency says it received 14,100 complaints filed by military consumers between July 2011 and February 2014. Also, the number of complaints the CFPB received rose by 148% from 2012 to 2013. And the agency does act on these concerns.
For instance, the CFPB and other federal agencies are now investigating Sallie Mae over its handling of students loans held by military members. The CFPB says it is examining “unfair or deceptive” practices that violate the Servicemembers Civil Relief Act, and allegations of discriminatory lending and payment-processing issues.
“Statistics show that four out of 10 U.S. service men and women are now repaying student loans, and the average amount borrowed is about $26,000, so this is a major issue that must be addressed,” Sorensen says.
Tip #3: Utilize the Public Service Loan Forgiveness Program
Under the Public Service Loan Forgiveness Program, individuals employed by the military for a decade, or those who’ve been in specific public service jobs for the last 10 years, can have their federal student loans completely discharged.
Some of the public service jobs that qualify for this student loan relief are: police officers and firefighters, emergency management workers, and specialists in public health, including nurses and healthcare practitioners.
Tip #4: Understand how to get a student loan discharge
Those who received National Direct Student Loans and Perkins Loans can get partial cancellation or a discharge of their loan based on their military service in they served for a full year in a hostile fire or imminent danger pay area.
So if you qualify for loan cancellation, Sorensen suggests supplying a copy of your DD214 (discharge form) and a letter requesting a discharge to your loan servicer.
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