I’m Being Chased by AAFES and Military Star Card for a Debt I Paid – Brandon


Dear Steve,

In 2010, I opened a Military Star Card account with AAFES. I soon slipped into default after losing my job, and I was forced to go on disability (both Social Security and VA). We received notices from Star Card, but could not do anything about it. A year or so later, they started garnishing money out of my disability payments. Since AAFES is a government entity, they can use the Treasury department to do their collecting. We never received a notice that our account was going to collections nor that they would start garnishing our wages.

So two or so years later, the payments suddenly stopped being garnished. We inquired and we’re informed we had paid the account off.

Now, a year later, we were informed that they had used a tax return from someone who (fraudulently) filed income tax under my social security number. Not only did they return the money, but they started adding interest and penalties again. We only found out after my disability started to be garnished again. I inquired what was going on, and AAFES said I had to talk to Transword, but Transword said I had to talk to AAFES. I have finally found out that they are now saying we owe 5,000 dollars (despite paying over $200 a month for 3 or 4 years AND our balance before the income tax debacle was only $1,500. In one year, they have added $3,500 in interest, penalties, and late fees. I was then informed that, even though they were getting money every month, they were still charging late fees, penalties, and interest monthly. Today I was told that the over $200 a month only covers the penalties, late fees, and interest, with no money over the last four years going to principal. So in all, we will have to pay almost $15,000 for a $5,000 debt… if we could pay it off today.

Just found out that AAFES added another $800 this month for something despite our last interaction being in 2010.

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Is there anything I can do to fight the outrageous penalties since they never tried to collect the debt? How is it that they are able to charge late fee and penalties if we are paying? Is it worth fighting? Too many veterans are having to deal with this ridiculousness for them to be allowed to continue such practices… how can I help ensure this never happens to anyone else?



Dear Brandon,

Now there is a situation that sucks.

I suppose the first issue is trying to figure out what really happened when they stopped garnishing you the first time. Was the debt paid at that point or did they just drop the ball.

If you ever get a garnishment notice again and you can’t afford it, follow the process in the notification letter to ask for a hearing. They often reduce the garnishment.

But at this point in a perfect world I would suggest you get a statement of your account that clearly shows the balance and payment history. Without that you and I are just guessing at what happened.

And you ask if they can charge fees and penalties, yes. But that really depends on if your account was delinquent. I don’t think either of us are confident at this point why the garnishment stopped and what was the balance when it stopped.

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So there are two ways to deal with this that would be the least stressful or most powerful.

The first would be for you to find a local consumer advocate attorney who can represent you with the lender to get to the bottom of all of this and see if they are following the law. One place to look for such an attorney is at consumeradvocates.org.

The second option if the balance is very high and unaffordable would be to consider bankruptcy. This can legally close the door on the debt. While it sounds like you may be judgment proof, this is not a typical debt since it is owed to the federal government and as you noted, can garnish your wages without taking you to court. But in bankruptcy the AAFES Card is just another unsecured creditor.

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The income tax issue is another horrible event. Apparently now you’ve been the subject of IRS identity theft and hopefully the IRS has assisted you with that most unfortunate matter.

One of the better solutions the IRS now has is their PIN program. “IP PIN: The IRS Identity Protection PIN (IP PIN) is a unique six-digit number that is assigned annually to victims of identity theft. It helps show a particular taxpayer is the rightful filer of the return. For 2016, everyone with an IP PIN must have it entered on the return. This includes primary and secondary taxpayers as well as dependents. Please be aware: some states also may have new security PINs this year. If the IRS issued you an IP PIN you must use it to file your federal tax return.”

Bottom line: I’d get to the bottom of this and take some action. It’s not going to get better by ignoring it.

Damon Day - Pro Debt Coach

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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