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Alyse Phillips: Welcome to Veterans Legal Lowdown. My name is Alise Phillips,
and I'm joined today by Lisa Ioannilli. We are attorneys for the law firm,
Chisholm Chisholm and Kilpatrick. Today, we're going to be explaining new regulations VA must
follow when reporting VA debts to credit reporting agencies.
So, just a little bit of an overview. An overpayment is a debt VA creates when it
determines a veteran has paid more than what they're entitled to. So,
in that case, the veteran must return the money within 30 days
of being notified by the VA. If they do not be able to, we'll
recoup or recover the debt from the veteran, by withholding current or future disability payments.
An example of this is triggered when someone, for example, has a dependent status change,
such as a divorce and the veteran does not update the VA
with the necessary information. They still receive money for the eligible dependent. In that case,
there would be an overpayment, and they would be expected to repay those funds.
Some veterans receive retired service pay and VA disability compensation at the same time.
Those are typically subject to the government's double-dipping Laws,
stating that benefits cannot be duplicate duplicated. So, to comply with this law,
these veterans are required to offset part of their service retired pay.
The amount that a veteran receives in VA compensation is subtracted from the amount
that they would receive from retired pay. So, this subtraction is referred to as a VA waiver.
Eligible military retirees may be able to recover some or all retired pay that retirees waive
for the VA pay through Concurrent Retirement and Disability Pay,
CRDP is what it is referred to, or Combat-Related Special Compensation, referred to as CRSC.
Lisa, why don't you talk a little bit about what brought on these new regulations?
Lisa Ioannilli: So, prior to January 5th, 2021, the VA Debt Management Center reported
an average of 5,000 delinquent veteran accounts monthly. The DMC regularly receives complaints
from veterans whose accounts have been reported to consumer reporting agencies.
Common complaints from veterans include loss of security clearance, inability to obtain
approval for home loans or home financing, and difficulty securing rental housing.
The new regulation acknowledges that debts stemming from a benefit
administered by the VA are different than consumer debts. And they may be due to a
variety of factors such as overpayments, that are not the fault of the veteran.
The final rule amends VA's regulation, which governs the reporting of delinquent debts to
consumer reporting agencies. Specifically, the update changes the regulations to comply with
the Johnny Isakson and David P. Roe, MD Veteran's Health Care and Benefits Improvement Act of 2020.
This act gives VA Secretary the authority to impose regulations that establish the
minimum amount of medical debt that will be reported to consumer reporting agencies.
The new rule went into effect on March 4th, 2022. The change will establish the
methodology for determining the minimum threshold for debts reported to consumer reporting agencies
and exclude from the minimum threshold debts, in which there is an indication of fraud,
misrepresentation, or bad faith on the part of the debtor. The intent of this change is
to lessen the negative impact of consumer reporting agency reports on veterans.
Alyse: Thank you so much. So, I'm just going to talk a little bit about understanding the
methodology for determining minimum thresholds in these situations.
So, as part of the regulation addition, what we see is Section 38 CFR 1.916,
which basically provides a methodology for establishing a minimum threshold, as well as
clarifying the threshold that only applies to debts arising from benefits administered
by the Under Secretary for Benefits or the Under Secretary for Health.
So, specifically, VA is only going to report debts that meet the following standards:
First, the debt is classified as currently not collectible. In this instance, the debt
is currently not collectible if VA has exhausted available collection efforts, including as
appropriate, referrals to administrative offset, and of course collection. Second, the debt is not
owed by an individual who is determined by VA to be catastrophically disabled or has reported to
VA a gross household income below the applicable geographical adjusted income limits. That would
entitle a VA beneficiary to cost-free healthcare, medications, and or beneficiary travel.
And finally, the outstanding debt is over $25. Such or higher, that VA may be from the time,
in order to accord with Section 1.921 of that 38 CFR.
Lisa, why don't you just reflect a little bit on how this is going to impact veterans?
Lisa: So, there has been commentary both in favor of and against these changes including arguments
around the definition of catastrophically disabled and the referral of medical debts.
However, by establishing a minimum threshold, VA aims to ultimately reduce the number
of debts reported to consumer reporting agencies. Thereby, decreasing the number
of veterans negatively impacted by these reports. Elise, any other thoughts on this?
Alyse: I think that will just about wrap it up. So, thank you so much for joining us,
everyone. For more information, please check out our blog at CCK-law.com. Thank you.
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