Attention scammers: The military, government and consumer
groups are fighting back against financial fraudsters and unscrupulous business
people who seek to profit from the often young and sometimes financially naive
men and women who serve their country. Federal and state regulators, along with other groups, are also offering education, protection
and recourse for those caught in the cross hairs.
The battle comes amid a proliferation of shady offers
targeting members of the military for mortgages, car loans, payday loans and
cash advances. "If you go outside almost any military installation, you
see the used car places, the title loan places," says Guy Shields, a
retired Army colonel and spokesman for Army Emergency Relief, a private nonprofit group incorporated in 1942 to assist soldiers in financial need. "The younger
generation in particular is sometimes susceptible."
Service members are particularly attractive to scammers, according to the Federal Trade Commission, because in addition to their military duties, many soldiers are taking on for the first time the responsibilities that come with living on their own and earning a steady paycheck. Fraud against any consumer
is unfair, but with military personnel it may have national security
implications: It can undermine military readiness and troop
The FTC has stepped up its
efforts to reach out to military consumers in recent years and has seen a
steady increase in the number of complaints coming from them. The FTC
tracked 65,957 complaints from service members in 2013, up from 62,211 in 2012,
spokesman Frank Dorman says.(Those figures exclude Do Not Call registry and
identity theft complaints.) Top grievances concerned debt collection, impostor
scams, fraud involving offers of prizes, unlawful banking or lending practices
and scams offering mortgage foreclosure relief or debt management services.
Service members are also increasingly taking their complaints
to the 3-year-old Consumer Financial Protection Bureau. The number of
gripes from service members increased 148 percent from 2012 to 2013 as the consumer watchdog
agency spread the word about resources provided to the military community,
according to a March 2014 report by the CFPB's Office of Servicemember Affairs.
"Behind those case numbers are service members with questions about mortgages, military spouses
seeking to invoke consumer legal
protections on behalf of their deployed spouse, veterans desperately fighting
scams that threaten to steal their retirement income, and many more members of
the military community with compelling, sometimes heartbreaking, real-life
stories," wrote Holly Petraeus, assistant
director of the agency's Office of Servicemember Affairs, in a statement released with the report.
Going after wrongdoers
In response, the CFPB and
other government agencies are going after wrongdoers and providing resources to
help protect military consumers. On July 29, the bureau announced, along with 13 state attorneys general, a settlement of $92 million in debt relief for 17,000 service members and other consumers harmed by a predatory lender. The CFPB says Colfax Capital Corp. and Culver Capital, also collectively known as Rome Finance, lured consumers with promises of no money down and instant financing for electronic goods sold at mall kiosks near military bases, then masked expensive finance charges by artificially inflating the advertised price of the merchandise. In some cases, Rome Finance was the initial creditor, and in others it bought financing contracts from merchants who sold the goods.
The company and its partner merchants told consumers they would pay an APR of 16 percent, when in fact the APR was 100 percent or more, the CFPB said. Rome Finance and two of its owners are permanently banned from consumer lending.
Separately, the CFPB has partnered
with state attorneys general and the Department of Defense to compile a
database called Repeat Offenders Against Military (ROAM) to track companies and
individuals that routinely target the military community, especially across
The FTC is also cracking down on
fraudsters who bilk military personnel. For instance, it shut down Texas-based
Goldman Schwartz in 2013 after finding the company used a variety of unlawful
tactics in attempting to collect debts from consumers in general and used
military-specific threats with service members. One service member told the FTC
that the debt collector claimed to be a military liaison, then threatened to
disclose the purported debt to the soldier's commander, claimed that
indebtedness was grounds for dismissal from the military and threatened to ruin
the soldier's military career.
Unscrupulous car dealers are counting on the service member missing a payment so they can repossess the car.
In another case, involving
mortgage modification scams, the FTC collected
a record $7.5 million civil penalty from Mortgage Investors Corp. of Ohio, one
of the country's largest refinancers of veteran home loans. The commission
said the company presented current and former service members with false claims
that low-interest, fixed-rate mortgages were available at no cost to them. The
FTC also alleged the company violated the Do Not Call provisions of the
Telemarketing Sales Rule.
The military has a different tool in its arsenal against
rip-off artists. It can ban service members from patronizing certain
businesses. Car dealerships have been a particular target. For example, in Virginia and elsewhere, unscrupulous car dealers
have misled military personnel into buying cars they don't want or can't
afford. The service members are then trapped into unfair contracts for vehicles
sold at inflated prices. Some dealers "churn" car sales -- selling a
car the dealer knows the service member can't afford, then repossessing that
car and selling it again.
"Automobile dealers are keenly aware of what young
service members earn," says Gerri Walsh, president of the Financial
Industry Regulatory Authority Foundation (FINRA). "They're encouraged to
buy the most expensive car they can afford. The terms the service member is
being offered are often not favorable. Unscrupulous car dealers are counting on
the service member missing a payment so they can repossess the car."
The Joint Armed Forces
Disciplinary Control Board for Southeastern Virginia and Northeastern North
Carolina has banned its members from patronizing various area car dealerships,
including Victory Lane Motors in Norfolk, Virginia (whose listing on
MilitaryCarDealers.com says "We specialize in the unique military car
buying experience"). The dealership was declared off-limits for military
personnel in August 2013, allowed back in November 2013 and then once again
banned after complaints from service members led the Virginia Department
of Motor Vehicles to investigate.
Know your rights and
Service members have a number of resources to help keep their money safe. Financial
information and education programs abound.
Counseling is available for specific questions. The Military Financial Readiness Program, which was created by FINRA and the Department of
Defense, trains military spouses to become accredited financial
counselors, providing both help to service members and a portable career for
spouses. These counselors walk service members through financial activities
such as planning to buy a car, budgeting and other topics, Walsh says.
The Military Lending Act caps
interest rates charged to service members, spouses and certain dependents at 36
percent per year for payday loans, auto title loans and tax refund anticipation
loans. But service members in financial straits need not pay even that
much, says Shields. Each branch of the military is affiliated with a private
nonprofit emergency relief organization dedicated to providing no-interest
loans (and sometimes outright grants) to active and retired soldiers and their
dependents when there is a valid need. Army Emergency Relief is among
The top needs receiving approval by AER are for rent and
mortgage help, followed by car repair, Shields says. Most loans are $2,500 or
less, but there is no limit. Other expenses the service routinely covers include
rental and replacement vehicles, relocation/travel expenses, dependent dental
care, repairing of HVAC systems, repair of major appliances, child car seats,
cranial helmets for babies and basic furniture.
"One of the biggest challenges is making sure all
soldiers know assistance is available," Shields says. "We tell them, 'If
you get in trouble, don't go downtown -- come to Army Emergency Relief.' The
other services are the same way. Assistance is available 24/7."
If service members are not stationed near their branch's
emergency relief office, they can seek help at another service's agency,
Shields says. (The other relief agencies are Air
Force Aid Society Section, Navy-Marine
Corps Relief Society and Coast Guard
Mutual Assistance.) And if the service member is more than 50 miles from
any military installation, the Red Cross will process the relief application.
Active Duty Alert
Soldiers who are serving overseas
can get an active duty military alert from each of the three credit reporting
bureaus -- Equifax, TransUnion and Experian -- to help minimize the risk of
fraud and ID theft while deployed. The alert requires extra verification before
credit is issued and lasts one year. The service member's name also is removed
from all pre-approved or firm offers of credit for two years, the credit
reporting companies say.
you want even more protection, you might look into a credit freeze, also known
as a security freeze. A freeze locks access to your credit file,
meaning fraudsters can't open new accounts in your name. It also keeps lenders and creditors from
viewing your file, so it's not a tool for everyone.
Armed with financial education and a sense of vigilance, military
service members may provide their own best defense against money woes.
See related: Military families remain easy prey for ID theft
, Military gets thicker armor against predatory loans
, 12 tips to help military families avoid financial rip-offs