CFPB Report Highlights High Rate of Collection Complaints from Servicemembers

Yesterday, the Consumer Financial Protection Bureau (“CFPB”) released its annual report from the Office of Servicemember Affairs highlighting complaints submitted in 2015 and CFPB enforcement actions that directly impacted the military community. The report found that servicemembers have been submitting debt collection complaints to the Bureau at nearly twice the rate of non-military consumers. In addition, the report highlights CFPB enforcement actions that have returned over $5 million to the pockets of servicemembers and their families in 2015.

CFPB Director Richard Cordray commented on the report: “The complaints highlighted in today’s report show that members of the military continue to have serious problems when it comes to debt collection. The Bureau will continue to closely monitor complaints from servicemembers to ensure our brave men and women are getting the protection they deserve.”

The Dodd-Frank Wall Street Reform and Consumer Protection Act established the Office of Servicemember Affairs as part of the CFPB to address specific consumer protection concerns for the nation’s military community. A priority of the office is to monitor the consumer complaints sent to the Bureau by servicemembers. Per the report, in 2015, the CFPB received over 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.

Some of the specific financial issues servicemembers complained about in 2015 included:

• Debt collection: Roughly 44 percent of the debt collection complaints submitted by servicemembers involved companies’ attempts to collect debt that the servicemember believes is not owed. Additionally, servicemembers often complained that debt collectors would contact their commanding officers and threaten their security clearance over a debt issue. A frequent complaint from veterans had to do with debt collectors attempting to collect debts on medical bills that should have been covered through their VA health insurance.
• Mortgages: In 2015, servicemembers submitted roughly 2,800 complaints related to mortgages. The most common type of mortgage complaint involved challenges servicemembers faced when they were unable to make payments, such as problems with loan modifications, collections, and foreclosures. In particular, servicemembers 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: Members of the military community submitted approximately 2,200 credit reporting complaints to the Bureau in 2015. The large majority—72 percent—of these complaints involved incorrect information on credit reports. For members of the military, complaints about incorrect information often resulted after the servicemember returned home from deployment or temporary duty stations to find fraudulent activity on their credit report. When servicemembers have attempted to fix the situation, they often experienced difficulty seeking a successful resolution with creditors.

Enforcement Actions

In 2015, the CFPB took four enforcement actions that particularly impacted servicemembers and their families.

1)     In October 2015, the Bureau brought an enforcement action against Security National Automotive Acceptance Company (SNAAC), an Ohio-based auto lender, for engaging in abusive debt collection practices against servicemembers and their families. In the action, SNAAC was ordered to refund over $2 million to affected consumers.

2)     In April, the CFPB ordered Fort Knox National Company and Military Assistance Company, a military allotment processor, to provide over $3 million in redress for charging servicemembers fees without providing the proper disclosures.

3)     Also in April, the Bureau 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.

4)     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.

Per the CFPB Press Release: “Through these actions, servicemembers received over $5 million in relief.”

The full report can be found here.

insideARM Perspective

It is absolutely mind-boggling that the rate of collection complaints to the CFPB for service members is nearly twice the rate of non-military consumers. It is an embarrassment to the ARM industry that members of the military are having these types of issues. That statistic speaks to a need for better training on the handling of military member accounts at ARM companies. Clearly there is an issue that still needs to be addressed and needs to be addressed quickly. Training, auditing, re-training and more auditing are the tools that are needed. Repeat offenders need to be ex-employees. Perhaps the recruitment and hiring of ex-military personnel at ARM businesses would help solve the problem.

Our industry needs to be better.

Our servicemembers deserve better.