Members of the military are falling victim to predatory loans that can cost them thousands of dollars and put their careers in jeopardy, senators said on Wednesday.
Some shady payday loan companies, automobile lenders and other firms specifically target men and women in the armed forces, witnesses told the Senate Commerce Committee on Wednesday. But troops might not be able to spot the bad actors trying to rip them off.
“Like the rest of us, our soldiers, airmen, sailors and marines are consumers,” he said. However, “their steady paychecks and relative job security make our service women and men appealing targets for unscrupulous businesses.”
Members of the military are often young and far away from home, which can make them easy targets for predatory financial companies. They also might face harsher consequences for racking up debt than the rest of the public.
“Service members, like all consumers, are not immune to the problems encountered by taking on too much debt,” said Sen. John Thune (R-S.D.). “However, the unique demands of military service may exacerbate the negative consequences from too much debt.”
For instance, failing to pay a debt is a violation of the Uniform Code of Military Justice, which means that service members who fall behind on their bills can lose their security clearances or even be discharged.
The Consumer Financial Protection Bureau (CFPB), the Pentagon and other agencies have begun developing education tools to help members of the military be able to spot scams and predatory lenders, but advocates say more needs to be done.
“Education is essential but I think it does have to be combined with the protection of laws as well,” said Holly Petraeus, the CFPB’s assistant director for service member affairs. She added that she would support both new regulations as well as laws from Congress.
Rockefeller seemed skeptical that education alone would stop predatory practices.
“You don’t really learn how people can take advantage of you until they have taken advantage of you,” he said. “Will it actually make them sharp when confronted by these scumbags?”
In 2007, the Defense Department issued regulations covering three different types of loans under the Military Lending Act. Those rules set out precise definitions for the loans, though, and predatory companies have developed way around them, Petraeus said.
“The concern now is that lenders have easily found ways to get outside of the definitions,” she noted.
On Wednesday, Sen. Ed Markey (D-Mass.) introduced the Military Savings Act, which would set up a pilot program for financial institutions on military bases to offer new products to help troops avoid payday loans and other lenders.
“People that serve us in the military are heroes, but heroes need help,” he said.
Rockefeller said that he would continue to explore ways to crack down on companies preying on the country’s troops.
“There are scoundrels out there and they have to be uncovered and whatever one does next,” Rockefeller said.