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Debt stays with you when you leave the service

Jun. 11, 2013 - 09:22AM   |  
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A disabled veteran has learned a hard lesson: The Army and Air Force Exchange Service will find a way to force you to repay your exchange credit card debt even after you leave the service.

Michael Shea left the Army as a specialist June 10, 2010, after more than 2½ years of service. He has a service-connected disability rating of 60 percent from the Veterans Affairs Department.

Before he left the military, officials sought to determine if he owed any outstanding debts to the federal government. If so, the amount would be withheld from his pay and allowances due.

He thought that would include his exchange credit card, which had a balance of $2,487. He was mistaken.

Eventually, AAFES pursued collection action, resulting in the garnishment of Shea’s federal tax refunds totaling $1,729 in 2011 and 2012. In April, he agreed to pay another $1,100 to settle the debt, and AAFES agreed to forgive the remaining interest that had accrued, as a hardship waiver.

Shea said some money was taken from his final paycheck for government debt, but he’s not clear about which government debts. He had just gotten out of the hospital a few months before he left the service, he said.

“Upon exiting the service, from my understanding this ‘government’ credit card was paid off,” Shea said.

Service members are not required to pay off their military exchange credit cards before they leave the service, said Sandra Bedison, chief of AAFES’ customer contact center, because it would pose a hardship for some people.

But those leaving the service short of retirement who don’t keep their exchange privileges must pay off credit card debt related to military clothing purchases within eight months, and must pay off retail purchases within 36 months, Bedison said.

“In the clearing process, AAFES is looking for local debt [at the local exchange facilities] or if the account is 90 days delinquent. He wasn’t 90 days delinquent at the time he cleared,” she said, although he was 60 days behind.

After Shea left the Army, AAFES sent notices to his address of record about the new terms with the payoff time frame, as well as delinquency notices, said Alyse Riney, AAFES’ supervisor of collections. No letters were returned to AAFES.

Shea said he kept that post office box for a few months after he left the military, but never received any notices.

Shea said that after the money was garnished from his federal tax refunds, he tried to learn from AAFES and the collections company how much he owed, and applied for a hardship waiver. He is unemployed and has a limited income — $1,060 in disability payments per month, plus a subsistence allowance from VA while he attends college.

“If there had just been some communication, we could have kept this customer from going to collections,” Riney said. “This underscores the absolute necessity for both parties to be in communication.”

Keep tabs on how much you owe and always check your monthly statement. When you make a payment, check your next statement to make sure it’s reflected. If you don’t get a monthly statement, contact the company. If you’re having trouble paying your bill, contact the company.

And always notify your creditors when your address changes.

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