The following post appears courtesy of the Civil Division's Consumer Protection Branch. There are many reasons why military service members and their families seem like attractive targets to some unscrupulous individuals and business. They have a steady source of income (including monthly pay and veterans’ benefits such as the Post-9/11 GI Bill). Many are young and relatively inexperienced in consumer affairs. And scammers know that service members can face adverse action under the Uniform Code of Military Justice for failing to pay a debt – which may make them hesitant to challenge the debt, question poor business practices, or even seek assistance from the chain of command. In addition, service members move frequently and don’t always know which businesses to avoid in a new community. Finally, after a move, service members can face pressure to quickly get their personal affairs in order, particularly when faced with a pending exercise or deployment. These factors are no secret to consumer predators who will use them to their advantage. And they are no secret to the Consumer Protection Branch, in the Department of Justice Civil Division, which is working hard to fight consumer predators like these who prey on service members. Fraud targeting service members unfortunately takes many forms. Here are some examples to be aware of:
- Car dealers who provide their own financing. In this fraud, a dealer will offer the buyer financing at a certain interest rate, but tell the buyer that it will take some time to work out the details, and let the buyer leave with the car. The dealer will subsequently call the buyer back and say that the financing did not work out, and offer financing at a higher interest rate. When buying a car, never leave the dealership until all paperwork has been signed.
- Insurance salespeople who market whole life insurance to group or captive audiences on military installations, often under the guise of providing a financial education class, and often using the pressure of a pending deployment as a selling point. Department of Defense policy and federal law prohibit these practices, but service members often do not know about other insurance options available to them, or take full advantage of their SGLI (Service member Group Life Insurance) benefit.
- Payday loans. Payday loans are short term loans, usually two weeks in duration, given for payment of a fee. When the loan is not immediately repaid, the fees multiply, quickly exceeding the original loan amount and equating to an exorbitant interest rate. The federal interest rate cap on payday loans to service members has helped but the problem has not been eliminated, as payday loans are still available online, and some payday lenders have attempted to work around this law. Service members should always check to see if they qualify for a no-interest emergency loan from their service relief society before seeking more costly loans.
- “For profit” colleges and schools that fail to provide service members a promised program. Some service members have been provided fraudulent information by certain schools regarding credit transfers, employment possibilities, costs and fees, and post-registration assistance. The Post 9/11 GI Bill is a valuable benefit, and before using it, service members must diligently research their options before deciding where to enroll. There are many resources available to assist the service member with this important decision. The best starting point is the Department of Veterans Affairs GI Bill website. Your installation education counselor is another valuable resource.
If you are a victim of fraud like this, what should you do? First, help us help you by reporting the fraud. In order to effectively fight fraud, the Department of Justice—as well as other law enforcement agencies—needs information. So, if you believe you are a fraud victim, report the case to authorities. Consult your military installation legal assistance office, and file an online report with the FTC Consumer Sentinel or FTC Military Sentinel. These complaint databases provide information to law enforcement authories worldwide to help identify and stop wrong-doing. Finally, help other consumers by reporting fraudulent cases to the local Better Business Bureau. And, if your state attorney general has a reporting system, report the fraud to them as well. It will only take you a few minutes to complete an online report, but the information you provide will go a long way towards stopping these crimes. And because awareness is truly the best prevention technique, military leaders at all levels should make consumer financial education a priority. Service members and family members must know where they can find assistance — on their installation and in their community — and take advantage of the advice and guidance those agencies provide. Just as you identify risks during a military operation and take action to mitigate that risk, you must do the same on the consumer protection battlefield. For information about Service Relief Society interest-free emergency loans, visit your branches' organization: Army | Air Force | Navy-Marine Corps | Coast Guard. For additional advice on purchasing a used car, see our previous post.