Economic survival for servicemembers and veterans

Consumer Action trainers Linda Williams and Nelson Santiago recently headed to San Diego to introduce organizations serving current and former members of the military to our updated "Economic survival guide for servicemembers and veterans." The module was created (with funding from VISA Inc.) as a tool that organizations can use to help servicemembers, veterans and their family members recognize and avoid scams and unfair credit terms, identify better borrowing and banking options and learn about special consumer protections available to them.

According to the National Center for Veterans Analysis and Statistics, San Diego County was home to almost a quarter of a million veterans in 2014. It is also home to several major U.S. Marine and Naval bases and, as such, represented an ideal location to begin this year's trainings, which will next head to Killeen, TX and Jersey City, NJ.

Williams kicked off the training by discussing a variety of costly financial services that are better avoided, including check-cashing services, payday loans and subprime auto loans. Williams pointed to the safer, mainstream alternatives recommended in the module, such as banking and borrowing services at banks and credit unions.

Williams then went on to provide information about recent amendments to the Military Lending Act (MLA), which was created to protect service members from predatory and risky financial products. The MLA's protections, including a 36% limit on interest rates charged to active duty servicemembers, have been expanded to cover more types of loan products. Under the old rules, lenders had been able to make slight adjustments to the terms of certain loans (e.g., payday loans) in order to skirt the law. Now regulations will be applicable to all types of vehicle title loans, installment loans, unsecured open-end lines of credit, payday loans, refund anticipation loans, credit cards and deposit advance loans. In addition, an existing 36% Military Annual Percentage Rate (MAPR) cap will now include items that might not ordinarily be considered interest, such as credit insurance premiums, and other fees that may include application or annual fees.

While invaluable for servicemembers, the MLA does not protect veterans, and because of this, participants at the training were advised to continue to caution veterans about predatory short-term credit products. A recent federal report on single-payment auto title loans illustrates the risks presented by predatory products. To get these loans, borrowers use their vehicles as collateral. If they don't repay the loans, the vehicles are seized. Some of the alarming findings in the report: More than four in five auto title loans are renewed the day they’re due because borrowers can’t afford to pay them off with a single payment, and four out of five auto title loan borrowers end up with their cars seized or repossessed for failure to pay.

Santiago went on to present the second half of the module, focusing on a variety of entities that target servicemembers and veterans, including for-profit educational institutions. Participants were introduced to Consumer Action's new brochure on choosing a vocational or job training school. While many legitimate for-profit schools exist, bad actors have used deceptive marketing and high-pressure sales tactics to get students to enroll, waste their military education benefits and take out additional expensive loans. Santiago outlined ways to avoid falling prey to a for-profit scam, like asking a "dream employer" whether they would hire graduates of the school or program.

Classic scams like phishing (attempts to steal information or plant malware on a user’s computer by masquerading as a trustworthy entity in an electronic communication like an email) and bogus charities were also covered. These scams tend to target military members and are often successful because they “sound” valid. For example, seven of 27 fake charities listed on the website Charity Navigator appeared to be related to veterans and included in their names the words "veteran," "soldier," "warrior" or "hero."

Click here to download the "Economic survival guide for servicemembers and veterans” publication.