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Protecting Military Servicemembers from Predatory Loans
Old 01-09-2015, 03:49 PM   #1
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Protecting Military Servicemembers from Predatory Loans

I know we have many retired and soon-to-be retired military members at this site. So, I thought you might be interested in this article from The Consumerist concerning protecting service members from predatory loans. The rest of us owe you one.

Protecting Military Servicemembers From Predatory Loans Is A National Security Issue – Consumerist
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Old 01-09-2015, 06:57 PM   #2
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When I worked for H&R Block in 2008-2010 I remember there were a few of their advance refund products that were not allowed to be used with members of the military because of their high interest rates. Too close to predatory lending.


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Old 01-09-2015, 07:31 PM   #3
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I do not see anything new or proposed.... just an article saying what some of the rules are and what can happen to servicemen who get into debt...


I have no problem with protecting servicemen who are deployed fighting for us... I do not think that someone stationed here in the US should have the same protection.... not everybody in the military is a fine upstanding citizen that pays all of their debt... if they fail to do so, they should face the same legal problems that anybody else that does not pay would face...


Again, I do not want someone deployed worrying about some debt back home.... but that is about all I would go for... but I think even the US based soldiers have more protection.... if so, good for them...
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Old 01-09-2015, 07:39 PM   #4
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States that lack usury laws like South Carolina and Virginia unfortunately have plenty of businesses that outright target military members for what would be considered "bad" loans at best, and usually for items people don't need. It's borderline criminal, if not outright criminal (I'm looking at you, USA Discounters). Unfortunately, some of these businesses are run by veterans who know they can take advantage of naive young military folks.

The worst part is, as an officer I'm not allowed to steer my people clear of certain businesses as I can be subject to a lawsuit for using my position to influence them in an unlawful way. That doesn't mean I can't say, "Don't go out this weekend and finance $2500 rims for your '97 Civic at 25% APR." I just can't tell them where not to go...
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Old 01-09-2015, 07:41 PM   #5
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I have no problem with protecting servicemen who are deployed fighting for us... I do not think that someone stationed here in the US should have the same protection.... not everybody in the military is a fine upstanding citizen that pays all of their debt... if they fail to do so, they should face the same legal problems that anybody else that does not pay would face...
Debt collectors will generally not have any power to do anything legally over deployed service members. I agree that once we're back home, we should be fair game. That said, the military needs to do a better job of educating its young people about personal finance. There's some training out there, but not much...
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Old 01-09-2015, 08:12 PM   #6
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The worst part is, as an officer I'm not allowed to steer my people clear of certain businesses as I can be subject to a lawsuit for using my position to influence them in an unlawful way. That doesn't mean I can't say, "Don't go out this weekend and finance $2500 rims for your '97 Civic at 25% APR." I just can't tell them where not to go...
I made it a point to tell subordinates in my career field specifically that, as far as finances were concerned, they were in a whole different situation than most civilians--and riding the top of a dangerous downward spiral. If they took on a lot of debt, they would eventually lose the security clearance they had. Without that clearance, they would be sent to another career field and have negative fitness reports--it would hurt their promotions at a minimum and likely result in their separation from the service. Then they definitely wouldn't be able to service their debt, and would would have the costs associated with moving. And they'd lose their accrued retirement credit, benefits, etc. Dumb dumb, dumb. Staying in the black is part of your job, just like staying physically fit, making sure your family is on a firm footing when you deploy, etc.
Having this talk early made it easier to follow-through later if the person got in money trouble.
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Old 01-09-2015, 08:32 PM   #7
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Worked for DOD-Army for many years and visited many of our Army bases. Usually the first business I saw when leaving the main gate was a pawn shop and right next to it a pay day loan business. I doubt the young service members are any worse when it comes to financial smarts then others in their age group, there's just a large group of them in one confined area so the vultures gather to collect the scraps.

Not sure how a 36% interest rate cap will help keep service members out of debt.

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Laws like the Military Lending Act are intended to reduce servicemembers’ likelihood of ending up in debt to predatory creditors by capping interest rates on loans at 36%
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Old 01-09-2015, 08:38 PM   #8
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Worked for DOD-Army for many years and visited many of our Army bases. Usually the first business I saw when leaving the main gate was a pawn shop and right next to it a pay day loan business.
And the "we tote the note" used car dealers. I love the signs on the lot: "God Bless Our Servicemembers" Indeed.
And a new one: Cosmetic surgeons. The lasses are saving up their pay while deployed and having "work" done when they get back.
"Gee, you look different. Must be all that good PT you got while deployed."

Probably a much better "investment" than the usual rims, underbody lights, and tuner mods.
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Old 01-09-2015, 09:41 PM   #9
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Debt collectors will generally not have any power to do anything legally over deployed service members. I agree that once we're back home, we should be fair game. That said, the military needs to do a better job of educating its young people about personal finance. There's some training out there, but not much...


Except that you still hear stories about some finance company going after them... I think one repoed a car that the spouse needed even though they were not behind.... soldier had to get on the phone from overseas to sort it out... I think that the military should have a group that a soldier could contact and have them sort it out for them.... nothing better to stop illegal things from happening than the federal gvmt coming by to talk to you about breaking the law.... and what would you do if you were on a sub I do not think that they surface for their sailors to make calls....

I also think that there should be some training available... but I do not think that it should be mandatory... if I got a job with some mega, I do not think that they are responsible to teach me how to handle money... why should it be any different with gvmt employees....
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Old 01-09-2015, 09:54 PM   #10
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if I got a job with some mega, I do not think that they are responsible to teach me how to handle money... why should it be any different with gvmt employees....
It is a bit different. The military gets involved in what would be considered the "personal business" of servicemembers in many ways. For example: If a soldier wants to get a part time job, or an officer wants to sell real estate on the side--they need to get their boss's approval. Every base establishes off-limits locations and businesses in the community--usually establishments that servicemembers are prohibited from visiting or doing business with, even off duty, in civilian clothes, etc. Megacorp can't tell employees where they can and can't shop, drink, buy a car. If a soldier gets into money trouble, they are more subject to approach by foreign governments wanting "help"--which directly affects the military. Military members are subject to a whole different justice system (megacorp can't lock you up for cheating on your wife, and is unlikely to fire you.). If a sailor doesn't show up for work one morning, someone >will< drive out to his house that day to check on him and get to the bottom of things. Guaranteed. Megacorp won't do that. The military has an interest in making sure servicemembers are deployable and there aren't large issues on their home front that would degrade their ability to go, or keep focused on their jobs once there. Mom and the kids being evicted because Sgt Smith can't pay the rent--that would fall into that basket. So, First Sergeants, Commanders, and various agencies on post/base get involved. To get back to your point, part of that involvement is mandatory training on how to stay out of trouble in all kinds of ways. It's not PhD level stuff, but it hits the high points. It's intrusive in many cases, would be totally unacceptable to civilians, but it's part of the deal.
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Old 01-10-2015, 12:09 PM   #11
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It is a bit different. The military gets involved in what would be considered the "personal business" of servicemembers in many ways. For example: If a soldier wants to get a part time job, or an officer wants to sell real estate on the side--they need to get their boss's approval. Every base establishes off-limits locations and businesses in the community--usually establishments that servicemembers are prohibited from visiting or doing business with, even off duty, in civilian clothes, etc. Megacorp can't tell employees where they can and can't shop, drink, buy a car. If a soldier gets into money trouble, they are more subject to approach by foreign governments wanting "help"--which directly affects the military. Military members are subject to a whole different justice system (megacorp can't lock you up for cheating on your wife, and is unlikely to fire you.). If a sailor doesn't show up for work one morning, someone >will< drive out to his house that day to check on him and get to the bottom of things. Guaranteed. Megacorp won't do that. The military has an interest in making sure servicemembers are deployable and there aren't large issues on their home front that would degrade their ability to go, or keep focused on their jobs once there. Mom and the kids being evicted because Sgt Smith can't pay the rent--that would fall into that basket. So, First Sergeants, Commanders, and various agencies on post/base get involved. To get back to your point, part of that involvement is mandatory training on how to stay out of trouble in all kinds of ways. It's not PhD level stuff, but it hits the high points. It's intrusive in many cases, would be totally unacceptable to civilians, but it's part of the deal.


Good points.... I stand corrected.....
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Old 01-10-2015, 02:18 PM   #12
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It is a bit different. The military gets involved in what would be considered the "personal business" of servicemembers in many ways.
Although I worked in law enforcement, not military, we had some of those same issues and for some of the same reasons, the main one being credibility. People could be, and were, fired for "Conduct unbecoming an officer". There was even a time when a prospective bride had to pass a background check as well - if she couldn't, you didn't get married or you quit. "Living in sin" constituted "Conduct unbecoming".

If your name was found in a hooker's little black book you were done. Being late on payments for anything got you an interview with the station captain that you really didn't want to have. If that happened too often, update your resume. And on it went....
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Old 01-10-2015, 02:49 PM   #13
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The military normally takes young people, other without training or experience, and trains them to do a job. So it is different in that respect. Also, military are normally far from family support systems, so often command structure gets involved where mega wouldn't. Military are often entrusted with more responsibility in form of greater responsibility to protect information, equipment, and fellow soldiers, sailors, airmen than a civilian. However, given that they are provided more trust I think they can and should be given some extra protection, but should also be held to the high standards. They prove day after day that they can rise to high but reasonable standards. When they get stoopid, they need to learn from it. Don't allow them to shirk a debt they take on just cause they are military.

Just my thoughts after 20 years watching good people get scammed and also watching some work the system.
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Old 01-10-2015, 03:31 PM   #14
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...
And a new one: Cosmetic surgeons. The lasses are saving up their pay while deployed and having "work" done when they get back.
"Gee, you look different. Must be all that good PT you got while deployed."

Probably a much better "investment" than the usual rims, underbody lights, and tuner mods.
I'm thinking the expense of getting "work done" coupled with underbody lights to highlight the work done might be easily justifiable. Especially if the underbody lights are put in by our very own davemartin88 as per his corian lithopane work. I wonder if this could be done on an outpatient basis.

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Old 01-10-2015, 07:10 PM   #15
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As I understand it, every service has free "legal assistance" lawyers available to members. Regarding making particular lenders prohibited to attract/work with military members, where does the federal government get that authority?
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Old 01-10-2015, 07:50 PM   #16
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As I understand it, every service has free "legal assistance" lawyers available to members. Regarding making particular lenders prohibited to attract/work with military members, where does the federal government get that authority?
I dunno. I can see how the federal government would have the authority to prohibit the servicemember from going to lenders of certain types, but I don't know where they get the authority to bar the business from engaging in commerce with a servicemember. I would think these businesses are/should be governed by the laws of that state, and if anything the states would have the call.
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Old 01-10-2015, 09:17 PM   #17
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It is a bit different. The military gets involved in what would be considered the "personal business" of servicemembers in many ways.
When I was a young naval officer thirty years ago, this was one of the things that I found most unappealing about the job. I did not want to even know about the financial and family affairs of the sailors who worked for me, let alone be responsible for sorting them out. Yet, whenever a creditor contacted the CO about some sailor's overdue debt, there I was, front and center. It was my job to write the letter to the creditor, explaining that we were not a debt collection agency and that contacting us likely violated the Fair Debt Collection Practices Act. And then I had to "counsel' the young sailor about the consequences of his being a deadbeat - both personal and professional consequences. Once, I had a sailor, older than me, who was almost totally incapacitated by his financial travails. One day, I had him bring in every bill, every contract, every credit card statement and dunning letter. Together, we went through each and every aspect of his financial life and tried to sort things out, establish priorities and get him back on his feet. It was an incredibly difficult conversation, and I disliked it immensely

In my experience, young sailors (and most likely soldiers, airmen and Marines) are just like any other person their age with their background. They sometimes live beyond their means, borrow irresponsibly, and do not properly consider the consequences of their actions. Like their non-military peers, they often fall for financial scams. I don't think they should receive an automatic pass simply because they are in uniform, but I do think that we should recognize the realities of service life -- often they are not in regular communication with the rest of the world or in any position to appear and protect their interests. To a certain extent, the Soldiers and Sailors Civil Relief Act tries to achieve this goal. For example, you can't get a default judgment (for failure to appear or plead in court) against a military member. See Soldiers and Sailors Civil Relief Act, Simplified and http://www.americanbar.org/content/d...thcheckdam.pdf But we could probably do more.

I think it benefits our country to have our young military members conduct their financial affairs wisely. It is difficult to give your full attention to your duties when you are worried about your finances. For that reason, I think that any money we dedicate to the necessary counseling and education will be money well spent.
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Old 01-10-2015, 10:57 PM   #18
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Base commanding officers have the authority to declare businesses "off limits" to their servicemembers. Typically these are shops selling marijuana equipment or bars with a reputation of prostitution or robbing servicemembers, but it could be extended to payday lenders and used-car dealers. The problem is doing it "equitably" so that the businesses don't make a public issue out of it and potentially embarrass the service or the local community.

And of course "off limits" only applies to the servicemembers. The base CO can't do much about families, let alone veterans.

The Military Lending Act is a good start, but it's full of loopholes. Some payday lenders even base themselves out of Native American lands so that they can claim their loan terms are exempt from federal law. This has been shot down by the U.S. courts, but the military only knows about a servicemember's debt when the servicemember is too deep in debt to extricate themselves without help.

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Except that you still hear stories about some finance company going after them... I think one repoed a car that the spouse needed even though they were not behind.... soldier had to get on the phone from overseas to sort it out... I think that the military should have a group that a soldier could contact and have them sort it out for them.... nothing better to stop illegal things from happening than the federal gvmt coming by to talk to you about breaking the law.... and what would you do if you were on a sub I do not think that they surface for their sailors to make calls....

I also think that there should be some training available... but I do not think that it should be mandatory... if I got a job with some mega, I do not think that they are responsible to teach me how to handle money... why should it be any different with gvmt employees....
Like SamClem says, it's the military's job to teach financial responsibility so that you're not tempted to sell classified material to the highest bidder.

It's not the military's job to teach financial independence. But I think DoD and the VA feel that it's bad publicity for U.S. military vets to be living under highway overpasses, so they assume some degree of responsibility for helping servicemembers & vets control their finances.

For active duty, and for Reserve/Guard on active duty, each service has a family support center on the base with paid staff and volunteers who help with a variety of financial (and other) issues. There are also non-profit relief societies that will help with financial counseling, zero-interest loans, and even grants. I've even heard stories of servicemembers calling USAA from Afghanistan in a panic over a foreclosure or a repo (because USAA holds the insurance policy) and USAA has the veterans on staff to help sort out the situation.

Of course this is problematic for Reserve and National Guard members whose families live hundreds of miles away from military bases.

As for the submarine force, that's one of the jobs of the squadron staff. If a financial (divorce, or child custody) issue comes to the military's attention, then the shore staff sends a message to the sub and the XO or command master chief sorts out the problem. Worst case is a humanitarian evacuation at the nearest port, but usually it's handled by a long message at the next opportunity.

Sea story:
During one of my submarine patrols in the North Atlantic, on Day 2 of 90 our XO got a message (from squadron staff) that Seaman Schmuckatelli's 2nd-floor apartment had a water leak. The leak was discovered when it went through the floor and collapsed the ceiling drywall of the apartment below. Renter's insurance would take care of it.

A day later the XO got a message that Schmuckatelli's car had been found in the Citadel Mall parking lot, fully engulfed in flames. Of course Schmuckatelli had no idea how his car had gotten over to the Citadel Mall, but he agreed that it could have been car-jacking joyriders. Another insurance claim.

A few days later the XO got a message that Schmuckatelli's bank accounts had been emptied, so all of his bill payments had bounced and companies were all calling his command to inquire about re-payment. The insurance adjuster also reported that the apartment's water leak had actually been caused by his waterbed being slashed to ribbons. The other insurance adjuster said the car fire was arson.

As Schmuckatelli's chain of command assembled (again) to review the message traffic, it occurred to the young man that someone might have a grudge against him. It turned out that he'd been living with a new girlfriend in his Charleston apartment before the patrol, and (as was his practice) he terminated the relationship the night before he left for the patrol. She was rightfully peeved at being rendered homeless on such short notice. She had already copied his keys and knew where he kept his spare checks, so she had bided her time until she knew he was at sea for another three months.

The issue was not deemed serious enough for a HUMEVAC, so SN Schmuckatelli had the rest of the patrol (and plenty of helpful commentary from his shipmates) to reflect on his relationship behavior. I'm sure the squadron staff was grumbling about the extra workload, but they answered all the mail for the insurance companies and the apartment manager and the banks and the utilities. After we returned, he spent several weeks in the barracks while he rebooted his life... and he owed a huge payback to the squadron staff who'd been handling the paperwork.

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Once, I had a sailor, older than me, who was almost totally incapacitated by his financial travails. One day, I had him bring in every bill, every contract, every credit card statement and dunning letter. Together, we went through each and every aspect of his financial life and tried to sort things out, establish priorities and get him back on his feet. It was an incredibly difficult conversation, and I disliked it immensely.
That's often followed by the question:
"So where was your chief petty officer?"
And the answer is:
"Well, they had their hands full with running the rest of the division and fixing our gear while I took care of this counseling problem."
or, even worse,
"It WAS the chief."

A friend (a new CFP) has spent several years volunteering at the Navy-Marine Corps Relief Society. That's usually the first stop for an indebted sailor or Marine when they're finally confronting the problem and seeking a solution. My friend is a military retiree who did his share of counseling in uniform, but he says these issues now take on a whole new meaning when the servicemember (or spouse) is sitting there with tears running down their face as they try to work through the budget spreadsheet. He has commanding officers who tell him "Oh, I've seen it all during my command" and my friend responds "Yeah, well I've seen all of yours during my time at NMCRS-- and every day-- and the rest of the fleet as well."

My daughter and I talked about these issues when she joined the Navy, but she knows how to handle her money now and the conversation didn't really make a big impact on her. However when she was staying at our friend's house she spent an afternoon with him at NMCRS as he took clients through the counseling process. It made a bigger impression on her than any amount of mandatory training ever could.
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