WASHINGTON, DC – U.S. Senator Jack Reed (D-RI) on Tuesday called for the Consumer Financial Protection Bureau (CFPB) and the Department of Defense (DOD) to investigate the findings of an alarming recent report indicating certain retailers have filed debt collection suits against active duty servicemembers who do not have a reasonable opportunity to defend themselves while serving out-of-state or overseas.

Reed was joined by Senators Jeanne Shaheen (D-NH), Richard Blumenthal (D-CT), Mark Warner (D-VA),  and Tim Kaine (D-VA) in a letter to CFPB Director Richard Cordray and DOD Secretary Chuck Hagel.  The Senators expressed concern about the “aggressive debt collection actions against active duty servicemembers without affording them, arguably, a real opportunity to defend themselves” and urged the agencies to fully investigate the claims.

“Since many active duty servicemembers are often transferred out-of-state – or even out-of-country – it is more difficult for them to defend themselves,” the Senators wrote.  “As a result, the retailers are alleged to have used these cases to force involuntary garnishment of servicemembers’ wages while they are serving our country.”

The ProPublica – Washington Post report found that a retailer with stores near military installations around the country was offering easy credit to servicemembers.  And then when those individuals fell behind on their payments, the company used the local courts near its Virginia headquarters to file thousands of lawsuits against active duty men and women in the Armed Forces, sometimes including those serving overseas.

In the letter, the Senators cited the Servicemember Civil Relief Act (SCRA) which was implemented to protect the legal interests of servicemembers who often face unique financial circumstances as a result of their deployment or service to our nation.  Specifically, the Senators said, “the SCRA allows servicemembers to devote their full attention to protecting our country and seeks to prevent unscrupulous actors from taking advantage of financial challenges that may result from a deployment.”  The recent report, however, indicates “that certain retailers may have violated the spirit of this law.”

“We urge you to fully investigate these claims and educate our servicemembers about their rights and the debt collection practices used by these retailers,” the Senators concluded. “In addition, we encourage you to determine whether there are any actions we can take to ensure due process for our servicemembers, especially the practice of including contractual provisions that may limit servicemembers’ ability to defend themselves while they are on active duty.”

Reed led this same group of Senators in writing to Secretary Hagel on a related issue last week regarding the DOD’s allotment system, which allows servicemembers to automatically direct a portion of their paycheck to certain persons or institutions.  Recent press reports indicate other crooked businesses have allegedly been using the allotment system, among other payment mechanisms, to sign servicemembers up for questionable payment plans and then subsequently suing them for failure to pay.

“We must adopt a zero-tolerance policy towards predatory lenders that target military members,” said Reed, a senior member of both the Senate Armed Services and Senate Banking Committees.  “Men and women serving our country should not have to worry about being taken advantage of while they are overseas or out of touch, and there must be strong protections in place to prevent these bad actors from preying on servicemembers at home and abroad.”

The full text of the letter is available below:


August 5, 2014

 

The Honorable Richard Cordray

Director

Consumer Financial Protection Bureau

1700 G Street, NW

Washington, D.C. 20552

 

The Honorable Charles T. Hagel

Department of Defense

1000 Defense Pentagon

Washington, DC 20301-1000

 

Dear Director Cordray and Secretary Hagel,

We write to call your attention to a recent report that certain retailers have undertaken aggressive debt collection actions against active duty servicemembers without affording them, arguably, a real opportunity to defend themselves.  We urge you to investigate these claims, educate our servicemembers about these practices and look into potential actions we can take to ensure that active duty servicemembers are able to defend themselves.

The Servicemember Civil Relief Act (SCRA) protects the legal interests of our servicemembers who often face unique financial circumstances as a result of their deployment or service to our nation.  SCRA allows servicemembers to devote their full attention to protecting our country and seeks to prevent unscrupulous actors from taking advantage of financial challenges that may result from a deployment.

A recent report from ProPublica and The Washington Post alleges that certain retailers may have violated the spirit of this law.  According to the report, these retailers seemingly included a provision in the fine print of their contracts that allows the retailers to bring suit against servicemembers in certain jurisdictions in the Commonwealth of Virginia, even though they may not be based there or, in fact, ever have been based there.  Since many active duty servicemembers are often transferred out-of-state – or even out-of-country – it is more difficult for them to defend themselves.  As a result, the retailers are alleged to have used these cases to force involuntary garnishment of servicemembers’ wages while they are serving our country.  The report also calls into question the adequacy of the defense provided by the courts in these instances.

We urge you to fully investigate these claims and educate our servicemembers about their rights and the debt collection practices used by these retailers.  In addition, we encourage you to determine whether there are any actions we can take to ensure due process for our servicemembers, especially the practice of including contractual provisions that may limit servicemembers’ ability to defend themselves while they are on active duty.

Thank you for your attention to this matter.

 

Jack Reed

Jeanne Shaheen

Richard Blumenthal

Mark R. Warner                                               

Tim Kaine

 -end-