Members of Military Targeted by Predatory Financial Practices
(WASHINGTON) -- Some servicemen and women serving abroad have found themselves not only facing the danger posed to them by their enemies, but threats on the home front from predatory financial practices aimed at them and their families. That danger was the focus of testimony on Capitol Hill Tuesday.
Two military advocates with famous political ties -- Holly Petraeus, the wife of CIA Director Gen. David Petraeus, and Delaware Attorney General Beau Biden, the son of Vice President Joe Biden -- testified before Congress Tuesday to discuss the progress made to protect 1.2 million service members from becoming the victims of scams and defending themselves from financial risks.
From her conversations with service members on 27 military bases across the country, Petraeus, who joined the Consumer Financial Protection Bureau in 2011 as assistant director of the Office of Service Member Affairs, found housing concerns -- from delinquent mortgage payments to looming foreclosures -- are top issues confronting military families. Often times, the service members are not equipped with the financial education to protect themselves.
Petraeus said service members are targeted by aggressive marketing practices from institutions of higher education, most often for-profit universities, and hounded by debt collectors preying upon military men and women, even citing one case where a widow was forced to immediately pay a debt upon her husband's death.
In an interview with ABC News, Petraeus said, "We've seen a lot of practices that are really not okay -- where they will call their place of business, their unit, repeatedly. Sometimes they will threaten to have them busted in rank. They'll threaten them with military justice which isn't theirs to administer, and in one of the worst cases I ever heard, they even hounded a combat widow that she needed to pay the debt immediately from the debt gratuity that she'd received when her husband was killed in combat."
Petraeus described service members seeking loans over the Internet which often have high interest rates as well as auto title loans, with some lenders tacking on exorbitant service fees. She recounted the story of a service member who sought a 32-month loan for $1,600, paying over $500 a month. By the time the loan was complete, the service fees amounted to $15,000, all for a $1,600 loan.
Biden, who serves as attorney general in Delaware and is a member of the Delaware Army National Guard in the JAG unit, told ABC News that scam artists tend to target people who are vulnerable, have a steady source of income, like members of the military, and who deeply trust others.
"They go to people who are taught to trust others and rely on others. Sometimes these young men and women who serve our country so heroically and so patriotically, they trust people, and sometimes they're not as, don't have as some [sic] of the background with how they should take care of their money, and they become susceptible to and vulnerable to people who are fraudsters and scamsters," Biden said.
Biden, who completed a tour of duty in Iraq in 2009, said in the hearing before the Senate committee on Banking, Housing and Urban Affairs, that he witnessed first-hand the additional pressures placed on service members facing foreclosure or financial problems while they are serving abroad, and he pressed the government to enhance financial protections for soldiers and their families while they are abroad.
"When you send a man or woman to go fight a battle for this country and off to war, they need to be focused on one thing, and that is doing the job, two things really -- doing their job as their commander in chief tells them to do and two getting home safely to their family," Biden said.
Last week, financial regulators introduced new guidance that would help military members deal with mortgage companies when they have underwater loans or are forced to move to new bases for work. The new guidelines would alleviate service members of the burden of having to sell their homes in difficult housing markets if they face a Permanent Change of Station order. An estimated 185,000 service members are homeowners who receive PCS order each year.
Biden and Petraeus argued for the need to restructure financial education programs for new members of the military as well as make training and resources more accessible and work to expand programs to the Internet. Petraeus, who said she understands first-hand as a military spouse the hardships service members and their families face, said she feels an obligation to protect service members from predatory practices.
Copyright 2012 ABC News Radio