U.S. Government to Pay $7.4 million in Debt Collection Class Action Settlement

The United States will pay some $7.4 million to settle a class action lawsuit brought by military veterans over the government’s debt collection tactics in recovering money owed for on-base purchases.

More than 6,700 former members of the military will receive $10,000 each in the settlement. A Federal judge in San Francisco approved the settlement Thursday.

At issue in the case was the government’s practice of “administrative offset,” or intercepting certain federal payments – like income tax refunds and social security benefits – to pay down other debts owed to the U.S. In the case, the lead plaintiff argued that the debt he incurred on a base in 1993 had reached the 10 year statute of limitations for the offset program before the government began withholding income tax refunds in 2004.

Julius Briggs, a disabled Army veteran, filed the case in 2007 after the U.S. had kept some $2,300 in tax refunds over the previous three years to pay down a $1,857 charge account debt he ran up buying uniforms and other items on a military base in 1993.

Once the class was certified, other veterans complained that the Army and Air Force Exchange Service (AAFES), which grants credit to military members for on-base purchases, miscalculated interest and fees and failed to send proper notices after they left the military. Many more also alleged that the offset was used after the statute of limitations had passed.

The court sided with the class earlier, agreeing that Briggs’ debt had passed the allowable time for the government to use the offset. The 10-year statute of limitations was lifted in 2008.

According to the Wall Street Journal, the case is among the first class actions ever to challenge the debt collection tactics of a federal agency.

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