Can You Join the Military With Collections? Let’s Find Out

People with debt are allowed to render military service. In fact, laws are in place to help military members manage financial obligations, including debt issues. Credit card debt won’t necessarily hinder you from pursuing a military career, but that doesn’t mean you can use the Armed Forces as a scapegoat for financial responsibility.

Are you worried about payday loans and credit reports stopping you from signing up for the US military? We’ll discuss the laws that help service members manage their personal finances and tips on managing debt while in the military.

Can You Join the Military With Debt?

Yes, having outstanding debt won’t automatically disqualify you from getting a security clearance in the military. When you enlist in the military, you must be prepared to have them dive into your history, including financial records.

Incurring debt before entering military service is legal, but the military won’t accept you if you have too much debt. A low credit score can impede your plans of joining the military or disqualify you from security clearance for certain positions. Delinquent payments in your record might also prevent you from joining the military.

Select branches may also want to confirm if you can meet your financial obligations as you receive military pay through the debt-to-income (DTI) ratio. It would be ideal to pay off debts to increase your chances of getting accepted into the Armed Forces.

What the Servicemembers Civil Relief Act Says

The Servicemembers Civil Relief Act (SCRA) is a notable federal legislation that can help service members manage all their bills and civil obligations. The SCRA grants legal and financial protections to active duty service members, including reservists called to active duty service.

Let’s say a service member was called to court for failing to pay car loans on time. The SCRA allows that military member to delay civil court proceedings for at least 90 days if they activate their SCRA rights. This delay may be extended if the judge deems it necessary. However, it must be proven that military service prevented that person from attending the civil court case.

One of the most notable provisions of the SCRA is that it lowers service members’ pre-service debt interest rates to six percent. Military personnel can have their credit card debt, mortgage payments, and other qualifying debts lowered to help them with financial planning. This protection applies during a service member’s active duty period and up to a year after they leave active service.

Once this period ends, creditors can’t charge back the money reduced due to the mandated SCRA interest rates. This particular SCRA protection is debt forgiveness, not debt deferment.

The SCRA also mandates that creditors won’t be able to bother active duty service members on a military mission. Debt collectors can’t revoke military members’ security clearance or have them demoted for failing to pay their debts.

Protections Under the Military Lending Act

Another law that favors military members is the Military Lending Act (MLA). This legislation mandates that consumer loans, including payday loans, must have a Military Annual Percentage Rate (MAPR) limit of 36%. The MLA applies to active duty service members, National Guard members, reservists activated for duty for at least 30 days, spouses, and select dependents.

The MLA covers various credit types, including installment loans, credit card debt, unsecured loans, deposit advance loans, and vehicle title loans. The main difference between this legislation and the SCRA is that it covers finance charges incurred after one joins the US Army or another branch. Moreover, the MLA has a higher interest rate cap.

Understanding the Fair Debt Collection Practices Act (FDCPA)

Meanwhile, the Fair Debt Collection Practices Act (FDCPA) protects military members from debt collectors who use deceptive, abusive, or unfair practices to collect debt. The FDCPA states that debt collectors can’t inform a service member’s commanding officer about their debt incurred. It also says that creditors can’t threaten service members with persecution under the UCMJ or Uniformed Code of Military Justice nor make threats about a specific action they’re not allowed to do.

The FDCPA also says that a debt collector must provide a written notice of a debt within five days after they inform that person of that debt including amount owned and the creditor’s name. This law sets communication boundaries with military personnel. For example, a debt collector mustn’t attempt to contact military members at unusual times, like before 8 AM or after 9 PM.

Moreover, if the debt is taking action through a lawyer, the debtor must only make communication efforts through that lawyer. The collector can’t threaten violence or use vulgar language. Harassment is also strictly prohibited.

The FDCPA facilitates debt collection decency and helps military members deal with debt collectors in a civilized fashion. While a creditor is legally entitled to collect a debt, it must be done correctly.

Rights When Dealing with Debt Collectors

Regardless of the severity of one’s financial issues, a service member has the right to know the following pieces of information from their debt collectors:

• The name of the one calling the service member
• The collection company name
• That company’s contact details (phone number and address)
• The debt’s balance is due
• The person or institution seeking payment
• How the service member can verify or dispute the debt

Verifying this vital information is a must for anyone with incurred debt. If the person the service member is speaking to hesitates to share any of the above details, asking it in writing would help. A written confirmation can clarify any issues and ward off potential scammers.

Seeking Help from the Consumer Financial Protection Bureau (CFPB)

The Consumer Financial Protection Bureau (CFPB) has a dedicated office, the Office of Servicemembers Affairs (OSA), whose sole purpose is to assist military families through the unique challenges of being in the military community.

The CFPB offers educational resources, monitors relevant complaints, and works with other agencies to help service members with financial dilemmas. The CFPB provides practical financial information, including those that involve the SCRA and MLA.

The CFPB ensures that all relevant parties rightfully respect the SCRA and MLA. Moreover, this institution helps collect relief rightfully owned to service members, military spouses and other eligible individuals.

What Debt Collectors Can’t Do 

While it’s essential to handle financial matters responsibly, those who render military service must also educate themselves on what debt collectors cannot do. Knowing one’s legal boundaries can help service members navigate debt collection better.

1. Make threats and set timelines: A debt collector isn’t permitted to threaten the military member or impose deadlines to pay the debt. You should always keep a calm demeanor when dealing with debt collectors. Confidence is vital to communicating with them.
2. Harass you when you’re at work: The FDCPA makes it crystal clear that a debtor isn’t allowed to make a scene at work. They must stop if you ask them to.
3. Discuss your debt with others: Debt collectors can’t inform others of your debt, especially your immediate superiors. They’re only allowed to do this if they’re legally liable to the debt.
4. Garnish your salary unless mandated by the court: Unless there’s a court order, a debt collector can’t garnish your wages.
5. Collect expired debts: Debt collectors can’t file a case against you or inflict damage to your credit report if you don’t want to pay debt that goes over the statute of limitations.
6. Improve your credit rating: Once the debt is sent to the collector, it’ll be in that person’s account for seven years and six months.
7. Force you to pay deceased relatives’ outstanding debt: Unless you co-signed a particular debt, you can’t be forced to pay a deceased relative’s outstanding debt.

Conclusion

You won’t be disqualified from rendering military service because of outstanding debt as long as you don’t owe an exorbitant amount of money, nor have you been guilty of making delinquent payments. The military offers solutions, such as SCRA rights, to help military members handle debt better.

However, proof of military service is vital to activate SCRA rights. SCRACVS can help service members prove they’re eligible for SCRA protections. Click here to sign up at SCRAVS and verify the active duty status.

FAQs

What is the debt-to-income ratio required to join the military?

The Armed Forces doesn’t have a mandated debt-to-income ratio for recruits. However, your overall financial stability might be considered during the recruitment process.

Can you get into the military with bad credit?

Bad credit won’t impede your dreams of joining the military. However, you might not get the security clearance to apply for certain positions.

What makes you ineligible to join the military?

Severe medical conditions and criminal convictions can render you ineligible to join the military. Failing the physical exam and not passing the aptitude test can also hinder you from becoming a service member.

Can you join the Air Force with collections?

Yes, you can still be accepted in the Air Force after a credit check that shows you owe debt. However, you must set payment plans to clear the debt.

How much debt is too much for clearance?

The term excessive debt is open to interpretation. In most cases, one’s debt-to-income ratio is considered.

Does the military affect credit scores?

Working in the Armed Forces has no direct correlation to one’s credit score. However, some people struggle to cope with finances after leaving the military.