Collecting from Military Service Members Requires Unique Sensitivity

The following article was submitted to insideARM.com by an executive of a firm specializing in working with members of the military. The firm asked that we not identify the employee — or the company itself — but we felt the perspective was too valuable to simply “delete,” so we’re posting it on their behalf. We’d be interested to hear others’ experience in this area, as we suspect this is a growing segment of many portfolios.

As our nation’s military operations have come to an end in Iraq, many of the brave members of our Armed Forces are returning home and ending their military service. We, as an industry, have an obligation to educate ourselves about the challenges these young men and women face back home.

From a risk perspective, actively collecting from a recently discharged service member creates several challenges. The biggest challenges — no surprise — are the legal and reputational risks for handling an account in a manner that ignores Federal regulations. Another risk is the significant challenges our veterans face from having been deployed and how it should shape our approach.

Pre-enlistment debt, although governed by the Service Members Civil Relief Act (SCRA), does not go away unless the creditor makes exceptions to do so. Debt incurred during service is not generally covered under the Act. Therefore, for many creditors and agencies, binding debts are often pursued. Those debts that qualify for protection under the Act must meet the complex legal requirements stated in the legislation.

If your creditors are placing service member debt for collection, and you are willing to take on the risk of collecting on them, the best way to minimize risk is through education and pro-active diligence. Familiarize yourself with the SCRA. Find out how your provider scrubs to ensure active duty service members are identified, and what their policies are in handling them. Seek a legal opinion on any sections that are unclear.

Additionally, the Consumer Financial Protection Bureau has identified a specific need to review lending practices to protect those in uniform. This is particularly notable, as it marks one of the few times a particular segment of society is specifically identified for special considerations pertaining to consumer rights. This speaks to the difficult circumstances service members face while conducting the business of protecting our freedom, and the challenges they face transitioning to civilian life. Staying in tune with any opinions and directives from the CFPB on this topic is critical for those portfolios containing service member and veteran debt.

Over the past eight years, there have been over 4,200 deaths and 45,000 injured in combat operations. While most of those returning veterans will have no long term mental or physical impacts from their deployments, it is important to be aware of the segment of those that may have or develop psychological issues. The impact of being in a hostile environment and experiencing and\or witnessing trauma, deaths and gunfire can ultimately manifest itself at different times and manners in individuals. The two most commonly reported issues from the conflicts are not external injuries, but those that take place on the inside. Post Traumatic Stress Disorder (PTSD) and Traumatic Brain Injuries (TBI) have easily surpassed external physical impacts as the leading reported trauma from deployments.

While this information may not be openly shared by a consumer, it is appropriate for us as an industry to be aware. Allowing a veteran to feel part of the solution is critical. Keeping a professional tone and making an effort to provide a thank you or acknowledgment of their personal sacrifice goes a long way. Following the rules is also critical. The established rules that governed their personal service during the deployments were a means to survive.

Communicating clearly your expectations in a concise manner and defining the playing field is required to gain success for all parties. Our service members, both active duty, discharged and retired, deserve the best treatment and terms we can provide.