Debt collectors are a necessary part of a free-market economy. But how they go about collecting debts – and where the line is between persistence and harassment – is a source of vigorous debate.
For years, debt collectors have been targeting federal employees and members of the military with security clearance-related threats. It’s no secret that financial delinquencies are the number one reason for security clearance problems, so a certain breed of debt collectors seeks to leverage fears of job loss into payment. Historically, some debt collectors were even going so far as to contact debtors’ military commanders or supervisors in an effort to put the squeeze on at work.
abusive debt collection practices
Horror stories about these kinds of abusive debt collection practices led to the enactment of provisions of the federal Fair Debt Collection Practices Act outlawing certain debt collector conduct. Under the FDCPA, debt collectors are now prohibited from telling third parties like military commanders, supervisors, or security managers that you owe a debt – although they can contact your supervisor or commander once to obtain your contact information if they don’t already have it.
Unfortunately, the FDCPA did not prohibit debt collectors from making threats to have a debtor’s security clearance revoked or to have them reduced in rank. Even though such threats are legally baseless[1], many consumers lack the legal knowledge necessary to understand that. This creates situations where debtors who might otherwise have had a valid legal defense against a debt – for example, that the amount reported by the creditor as owed is incorrect – feel pressured into simply paying.
Comprehensive Debt Collection Improvement Act
Earlier this year, the U.S. House of Representatives passed the Comprehensive Debt Collection Improvement Act (H.R. 2547) in part to rectify this loophole in the FDCPA. Among other things, the Act prohibits debt collectors from threatening military service-members with consequences for non-payment like loss of security clearance or reduction in rank.
As of the time of this writing, the Act awaits a vote in the Senate and would still need to be signed by the President; so, it remains to be seen if this actually passes into law. If you’re interested, you can follow congressional progress here.
In the meantime, current law does not prohibit debt collectors from threatening security clearances – and even if H.R. 2547 passes the Senate and is signed into law, the pertinent provisions appear to cover only military service members, not government civilian employees or contractors.
The bottom line? Debt collectors are currently free to make bogus security clearance claims, but they can’t actually follow-through on them. Resolve your debts in good faith, not because of empty talk.
For more on this, or to file a complaint against a debt collector, check out the Consumer Financial Protection Bureau’s resources for security clearance-holders and military service members here.
This article is intended as general information only and should not be construed as legal advice. Consult an attorney regarding your specific situation.
[1] While a debt collector has no power to deny or revoke a security clearance, the government can and does do so frequently for delinquent debts. Resolving delinquent debts in good faith is critical to obtaining or maintaining a security clearance. But that doesn’t mean that a debtor must forego a legitimate legal dispute over an amount owed because of a debt collector’s threats.
