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U.S. To Repay Veterans In Debt Case
By Ellen E. Schultz
The U.S. will repay $7.4 million to military veterans whose tax refunds and benefits the government improperly withheld to recover debts from charge and credit cards they used to buy uniforms and other items at military bases.
A federal judge in San Francisco on Thursday preliminarily approved a civil-court settlement in a case in which the government has agreed to repay up to $10,000 each to 6,715 former members of the armed forces.
The court had found earlier that between 2001 and 2008, the government collected debts that had been delinquent for more than 10 years, and were thus outside the statute of limitations for collecting the debts by "administrative offset," that is, by withholding tax refunds and Social Security benefits.
The case is among the first class actions to challenge the debt-collection practices of federal agencies. In recent years, the federal government, one of the nation's largest creditors, has stepped up efforts to recover more than $75 billion of delinquent income taxes, defaulted loans and other debts owed by individuals.
To collect debts, federal agencies can ask the Treasury to intercept federal payments to debtors, such as tax refunds and disability benefits.
The case, filed in 2007, was brought on behalf of Julius Briggs, a disabled 21-year Army veteran who in 1993 bought uniforms and other items worth $1,857 using a charge account with the Army and Air Force Exchange Service. AAFES, an agency of the Department of Defense, operates stores on bases around the world and issues Military Star credit cards.
Mr. Briggs, who worked sporadically and at times has been homeless, said he stopped receiving billing statements after he left the service, and lost track of the debt, which grew with interest and penalties. Between 2004 and 2007, the Treasury withheld a total of $2,373 from his income-tax refunds, even though the debt had been delinquent for more than 10 years.
The agency said Mr. Briggs still owed $3,938. But in the course of litigation, AAFES recalculated the interest on Mr. Briggs' debt and reduced that amount to $1,925, according to the plaintiffs' attorneys.
Other class members complained that AAFES miscalculated interest and fees, and stopped sending them statements after they left the service in the 1990s, which contributed to their default and caused their debts to balloon. Spokesmen for AAFES and the Justice Department, which handled the litigation, declined to comment.
Steven Lee, 46 years old, a Desert Storm veteran in Pahrump, Nev., said he owed about $600 on his card when he left the Army in 1995, but contended that AAFES didn't send a billing statement despite his numerous phone calls. AAFES turned the debt over to the Treasury, which withheld his tax refunds from 1996 to 2006, collecting thousand of dollars, he said. "They need to look at how they're conducting business," Mr. Lee said.
Marie Noel Appel, a lawyer in San Francisco, discovered the problem when she met Mr. Briggs at a clinic for the homeless where she volunteered. Chandler Visher Law Offices, where she was then working, brought the case; the Public Citizen Litigation Group in Washington D.C., which advocates for consumers, was co-counsel.
The 10-year limit for administrative offsets was lifted in 2008, but under terms of the settlement, the government agreed not to attempt to recollect the debt it would refund. The average class member's claim is about $1,100, according to papers filed in the San Francisco federal court.
National Gulf War Resource Center, Inc. 2611 SW 17th Street Topeka, KS 66604 Phone: Toll free 866-531-7183Fax:785-235-6531
