64% of servicemember complaints to bureau related to consumer reporting, debt collection

Credit or consumer reporting and debt collection continue to be the most-complained-about consumer financial products or services reported by military servicemembers, according to a report released Thursday by the federal consumer financial protection agency.

Types of credit card complaints by servicemembers. (Table from CFPB Office of Servicemember Affairs Annual Report 1/2019)

In its sixth annual report, the Consumer Financial Protection Bureau (CFPB) Office of Servicemember Affairs (OSA) says such complaints accounted for nearly 64% of the approximately 48,800 complaints submitted by servicemembers between April 1, 2017, to Aug. 31, 2018, the period covered by the report.

Overall, the report shows that servicemember complaints handled by the bureau during this time break down as follows (figures given are approximate):

  • Credit or consumer reporting – 18,100 complaints
  • Debt collection – 12,900 complaints
  • Mortgages – 5,200 complaints
  • Credit cards – 4,000 complaints
  • Checking or savings – 2,600 complaints
  • Student loans – 1,700 complaints
  • Vehicle loans or leases – 1,400 complaints
  • Money transfers, money services, and virtual currencies – 1,000 complaints
  • Personal loans – 800 complaints
  • Payday loans – 400 complaints

Regarding consumer reporting and debt collection complaints, the OSA says it hears regularly from servicemembers “who are worried that incorrect information on their credit reports will put their security clearance, duty status, potential promotion, or even military career in jeopardy,” the report says.

The report says recent changes to the Department of Defense (DOD) security clearance rules make it more important for servicemembers to resolve credit reporting and debt collection issues as quickly as possible. It notes, for example, that an average of 4,700 to 8,000 servicemembers are separated each year from the military for financial issues (e.g., losing their security clearance due to unpaid debts). “These separations take a real toll not only on servicemembers and their families, but also cost the government hundreds of millions of dollars (up to $456 million per year) to recruit and replace those servicemembers,” the report says.

Other emerging issues and continuing trends for servicemembers, the report says, include:

  • Medical, telecommunications and VA debts on servicemembers’ credit reports
  • Student loan servicing obstacles
  • Automobile add-on products in the car buying process

Noting servicemembers have additional protections under the Military Lending Act (MLA) and the Servicemembers Civil Relief Act (SCRA), the report points to complaints about MLA’s application to credit card accounts following recent MLA rule changes.

Servicemembers top complaints about credit cards, the report says, relate to purchases charges on accounts and fees or interest charged. Noting that servicemembers are “slightly more likely” than the general population to complain about fees or interest charged, the report say recent rule changes applying the MLA’s rate cap to credit card accounts “could increase the volume of this complaint type from servicemembers. The Bureau will continue to monitor complaints relative to the MLA and credit card accounts.”

Last year, then-acting bureau director John (“Mick”) Mulvaney suggested the bureau had limited authority to enforce the MLA; last week, the bureau’s current director, Kathleen (“Kathy”) Kraninger, wrote Congress promoting legislation specifically providing such authority.

Here’s what we’re hearing from servicemembers, veterans, and military families

Office of Servicemember Affairs Annual Report (January 2019)

RR: Kraninger writes Pence, Pelosi in seeking Military Lending Act supervisory authority(Jan. 17, 2019)