Assault on the financial front

One collector threatened to put a lien on their Lakeville home and garnish her husband's wages, Deborah Johnson said. "She called me 'scum.'"

Despite laws designed to protect them, an increasing number of service members are reporting abuse from collection agencies.

The Better Business Bureaus -- which operate hot lines in some cities to help military personnel -- fielded an estimated 1,800 complaints about collection agencies from military personnel in 2006 across the country, the latest year for which statistics are available, says Alison Preszler, spokesperson for the Council of Better Business Bureaus in Arlington, Va.

Official numbers are not kept, but Angela Martin, chief of legal assistance at Fort Bragg, N.C., estimates that thousands of active-duty soldiers have been victimized by collection agencies. Martin said she has seen more than 100 clients in the past year.

In Minnesota, Capt. Lindsay Kimber said she has handled about 15 or 20 such cases in the past 18 months. Before that, she had "slim to none."

"It's monstrous to me," said Kimber, an attorney with the Judge Advocate General Corps (JAG) for the Minnesota National Guard in Rosemount. "They are out there defending their country, and the families are put through a tremendous amount of stress."

Rozanne Andersen, the executive director of Edina-based ACA International, formerly the American Collectors Association, said her nonprofit organization "would denounce harassment of any persons and certainly the family and loved ones who are in the military."

From the Civil War to modern times, federal laws have given special protections to troops. Protections were updated in December 2003, when President Bush signed the Servicemembers Civil Relief Act. Among its provisions, the law meant to prevent personal property such as vehicles from being repossessed without a specific court order.

The aim was to help service members called to war who struggle to meet payments on things such as rents, mortgages and installment contracts. That struggle has intensified with the full-time deployment of traditionally part-time forces in the National Guard and military reserves.

The military does not track complaints about collection agencies, but the National Guard says that 45 percent of its members are in some sort of financial distress, according to Ray Kelley, legislative director for veterans organization AMVETS.

Reports of threats, abuse

Even without the special attention for service members, federal law forbids collection agents from harassing people, using abusive language and calling third parties about someone's debt. Yet complaints from military families include all those tactics.

Kaelyn and Jeremy Wahlberg in Lindstrom, Minn., are both in the Minnesota National Guard and started getting calls in January while Jeremy was stationed in Iraq. Homecomings Financial was demanding payment on a second mortgage.

The company was mistaken, Kaelyn Wahlberg told the in-house collection agent. In February the company wrote, saying that "an error was made," and apologized. But the calls continued.

On leave this spring, Jeremy Wahlberg got a call while on a quick family trip to Orlando. An agent called him "a deadbeat, spending money to take your family on vacation ... instead of paying your mortgage."

Wahlberg said he thought to himself, "Hold on a second, I almost got killed a week ago. I earned that right to come home to spend some quality time with my family. I pay my bills on time."

A day after a call from the Star Tribune, Brent Weinberg, manager of public relations for the parent company for Homecomings Financial, sent an e-mail saying that there had been an accounting problem.

"We have apologized to the Wahlbergs for any fault on our part in the handling of their account," he said.

In Lakeville, Deborah Johnson said she was "terrified" when an agent for Pioneer Credit Recovery threatened to put a lien on their house. Daniel Johnson received her frantic calls at the Tallil Air Base in Iraq.

"I couldn't sleep at night," he said. "She was literally bawling when I talked to her on the phone a few times."

Johnson, now back from Iraq, said the trouble dated to a 1983 federal student loan he got to attend Dunwoody Institute. He said it was his understanding that the Guard paid off that loan when he enlisted in 1985. (The Guard's records no longer go back that far.) But Pioneer Credit, which contracts with the U.S. Department of Education, began calling in 2007, saying he owed $1,900.

"We respect all of our military overseas and we comply with all applicable state and federal collection laws," said Rick Castellano, speaking for Sallie Mae, the nation's largest student loan company, and parent company of Pioneer.

But federal law "does not prohibit collection of a debt from a service member engaged in active duty," he said.

The Johnsons turned to Minneapolis attorney Pete Barry, who filed a federal lawsuit accusing Pioneer of illegal debt collection practices, including harassment, abuse and making false threats.

Pioneer has stopped calling the Johnsons, but the couple isn't in the clear. Another collection agency assigned by the U.S. Department of Education now calls. Deborah Wiley, an ombudsman with the department, said that Johnson has a debt, but offered no details.

For Sgt. Ryan Eric Anderson, 27, of St. Paul, the trouble was a T-Mobile cell phone contract he canceled when he was deployed to Bosnia with the Minnesota National Guard.

The 2003 law was supposed to make it easier for a deployed soldier to cancel a cell phone contract, and Anderson said that T-Mobile agreed to waive its early termination fees. But he discovered a debt to T-Mobile on his credit report when he tried to buy a house in 2005. Facing a new deployment to Iraq that year, he called the Florida attorney in charge of the collection. He said collectors threatened to sue him and hung up on him several times.

Barry took Anderson's case and reached a $9,000 settlement. T-Mobile said it was investigating.

Sgt. Todd Bowers of the Iraq and Afghanistan Veterans of America in Washington knows the problem firsthand. He came home from Iraq in 2005 to find a stack of collections letters for failure to pay student loans, even though he had notified lenders that he had been called to active duty. The collection agency was helpful in resolving the problem, but "no help in repairing my damaged credit history," he says.

Problem with local agency

Among the companies pursuing service members is a Coon Rapids collection agency with an unsatisfactory rating with the Minnesota-North Dakota Better Business Bureau.

Newton Scott Williamson of California reported Diversified Collection Services to the bureau after an agent demanded payment for a Sprint account that he thought he'd canceled.

"She cut me off and said, 'You mean you being in the Marines means you shouldn't have to pay your bill.'" He said she threatened to call his commanding officer, even though calling a third party about someone's debt is not legal.

Diversified did not respond to the Better Business Bureau, said Barbara Grieman, vice president of the bureau here. Of 50 complaints filed against Diversified in the past three years, the company did not answer 10, which the bureau considers very high, she said.

Mike Holtz of Diversified said he believed that Williamson's problem had been resolved.

Group advises relief

After hearing a summary of allegations, ACA International's Andersen said, "It shocks the conscience."

She cited a 2005 ACA memo that recommends that members consider whether they should "provide additional relief to or continue to collect from service personnel who are mobilized for military action."

Barry, the defense attorney, would like to see debt collectors fined an extra $5,000 if a jury finds that they harassed a member of the U.S. military.

Martin, the Fort Bragg attorney, said she would favor criminal penalties.

"They are so brazen because they think they are untouchable," Martin said. "Every threatening call that works strengthens their resolve to keep breaking the law."

Randy Furst • 612-673-7382