Pentagon's debt collectors accused of ripping off soldiers

April 4, 2008 "It is shocking that a U.S. government agency would illegally take this money from veterans who have served our country well," said Deepak Gupta of Public Citizen.

Public Citizen and consumer lawyers have filed a class-action lawsuit against the Army and Air Force Exchange Services (AAFES), which issues credit cards to U.S. service members to buy goods at military stores. The suit alleges that AAFES improperly took money from military credit card users for expired debt and inflated penalties and fees. Unlike civilian debt collectors who use phone calls and letters to try to collect payment, the military simply deducted the money from service members' government benefits or tax refunds, the suit contends.

"To take away these benefits because of old debt incurred during military service to buy things like uniforms and equipment is outrageous," said Gupta.

Lead plaintiff Julius Briggs, a veteran of Operation Desert Storm, said that AAFES illegally withheld more than $2,300 from his disability payments. According to the suit, Briggs' debt was too old to collect, and AAFES also hit him up with inflated interest rates and penalty fees. Briggs claims the withheld money caused him to miss his housing payments, leaving him temporarily homeless.

The suit charges that AAFES has illegally appropriated millions of dollars from thousands of service members over the years.

The U.S. Department of Justice lawyer defending the case declined comment, but the government has moved to have the suit dismissed on sovereign immunity grounds. At the U.S. District Court in San Francisco this week, plaintiffs' attorneys argued the case should go forward.

"With any luck, this lawsuit will force AAFES to stop collecting money that it has no right to take," said Briggs.