To be Filed With Basic FPM Chapter 735


C 2, AR 690-700

Chapter 735





The purpose of this appendix is to provide DA policy on employee indebtedness, including guidance on disciplinary actions and on procedures to be followed in dealing with creditors and debt collectors.

a. In enforcing the indebtedness standard, formal disciplinary actions will be taken only when management can clearly establish that the nonpayment of the employee's just debt has or will have a harmful effect on-

(1) The employee's performance.

(2) The ability of the organization to accomplish its assigned mission. Such disciplinary action will be taken only if counseling and other corrective measures have failed to resolve the problem and only after full consideration of the employee's personal circumstances and a finding that failure to meet the just obligation was with-out good cause.

b. Suspensions should be avoided when selecting appropriate disciplinary actions to correct indebtedness.


DA will not be used as a collection agency for commercial obligations or claims based on court judgments.

a. Creditors and collectors will be denied access to employees to present or collect debts during working hours.

b. Creditors will be told-

(1) That management will forward their written complaints to employees.

(2) That these complaints are a private matter between the creditor and the employee.

(3) That the Army will not be involved in debt collection activities.

c. Debt complaints received from debt collectors are regulated by Public Law 95-109, "Fair Debt Collection Practices Act," 20 September 1977. Procedures contained in paragraph E-4 apply when complaints are received from debt collectors.

d. Except as provided in paragraph E-4, when debt complaints are received, the creditor will be informed by letter of the information in b above. No further action will be taken unless a clear nexus can be established between the efficiency of the service and the debt complaint. (See Merit System Protection Board (MSPB) Decision Joseph A. Monterosso v. Department of the Treasury, MSPB Docket Number BN 075209023, June 12, 1981, including concurring opinion of board member Wertheim.)

e. Officials responsible for handling debt complaints should be aware of State laws protecting people from creditors and debt collectors. When there is no conflict with Federal statutes or regulations, officials should abide by State laws.


Effective administration of the indebtedness standard requires setting up a local program de-signed to help employees avoid (or solve) financial problems. Some elements, which may be included in the program, follow.

a. Publishing locally educational articles that stress the dangers of unrestricted installment buying.

b. Keeping in contact with local associations, such as credit bureaus, retail merchants associations, chambers of commerce, or better business bureaus, to obtain their help in educating employees and their cooperation in resolving individual problems.

c. Giving special attention to individual cases as soon as a potential problem arises by-

(1) Counseling the employee regarding the necessity for action to avoid trouble and advising the employee of available courses of action.

(2) Encouraging the employee to use the financial counseling and other services available from the credit union or local banks.


* The double dagger () indicates there is no corresponding appendix in the FPM.


(3) Helping the employee to make arrangements for a solution to the problem, including advice on a personal budget and contacts with creditors in an effort to work out satisfactory payment arrangements.

(4) In extreme cases, helping the employee to obtain legal advice regarding the procedure to be followed in filing a "Federal Wage Earners' Plan" under the provisions of chapter 13 of title II, United States Code. Such a plan, if approved by the court, may result in each unsecured creditor being paid off in full by a trustee of the Federal courts over a period of up to 3 years from funds paid monthly by the employee to the trustee. In no case should an employee be coerced or ordered to file a Federal Wage Earners' Plan.


The Fair Debt Collection Practices Act, 15 USC 1692, 91 Star 874, Public Law 95-109, 95th Congress, 20 September 1977, regulates the practices and permissible actions of debt collectors in collecting debts. The DA will not permit itself to be used as a means to circumvent the meaning or intent of this act. Section 803(6) of the act defines who is a debt collector and provides a list of exceptions from the definition.

a. In general, a debt collector is any person who uses interstate commerce or the mails in any business that has the collection of debts as its principal purpose or who regularly collects or attempts to collect debts owned or due to another.

b. The term "debt collector" does not include-

(1) A creditor, an officer or employee of a creditor, or a division or branch of a creditor who is collecting a debt on behalf of and in the name of the creditor.

(2) An officer or an employee of the United States or State attempting to collect a debt in the performance of official duties.

(3) Any person serving legal process connected with the judicial enforcement of a debt.

(4) Nonprofit consumer assistance organizations who provide debt counseling and assistance

to consumers for processing and liquidating debts by receiving and distributing payments to creditors.

(5) An attorney-at-law collecting a debt as an attorney on behalf of and in the name of a client.

(6) A person attempting to collect a debt when the activity-

(a) Is incidental to a bona fide fiduciary obligation or escrow arrangement.

(b) Concerns a debt that was originated by such a person.

(c) Concerns a debt that was not in default at the time it was obtained by such a person.

(d) Concerns a debt obtained by such a person as a secured party in a commercial credit transaction involving the creditor.

c. A debt collector is prohibited from contacting the DA about an employee's debt with-out the prior consent of the employee given directly to the debt collector or the express permission of a court of competent jurisdiction. In the absence of express permission of a court of competent jurisdiction, there must be general language by the court authorizing the complain-ant to take all steps reasonably necessary to bring about a postjudgment judicial remedy as determined by competent legal advice.

d. When a debt complaint is received from a debt collector, the complaint will be examined to be sure that it does not violate the prohibition of paragraph c above. If the debt collector does not state the authorization, a responsible official of the employing activity will request the debt collector to furnish either a statement or other documentation to support the debt collector's authorization to contact the DA. If this request is denied, the debt collector will be informed that no further action will be taken by the DA on the complaint. If the debt collector asserts that the employee has given consent for the communication, or if one of the bases of authority to make direct contact with the DA is adequately documented, the letter will be forwarded to the employee and the debt collector will be informed (see para E-2) of Army policy on debt collections.