Service members face financial challenges
Members of our armed forces may be well prepared for battlefield rigors, but when it comes to financial matters, many service members, especially young recruits fresh out of high school, are at risk of stumbling.
Indeed, service members are often found to have insufficient levels of financial education and are likelier than other adults to use payday loan services and other highercost alternatives to traditional banking, according to a February report from the nonprofit National Endowment for Financial Education.
Moreover, military spouses, who are often the ones responsible for household financial decisions, also are frequent targets for unfair, abusive and deceptive financial practices.
Consider just two examples documented in 2015 by the federal Consumer Financial Protection Bureau:
A California company lent a service member $2,600 for a payday loan with 219 percent interest.
A military spouse paid 300 percent annual interest on an auto loan from an Illinois company, essentially spending $5,720 to borrow $2,575.
Military members are inviting targets largely because of their guaranteed government paychecks, regulators said. And because they are often on the move and making hasty decisions without always thinking things through.
The U.S. Department of Defense, along with federal consumer watchdog agencies, are well aware of the need for more basic training on money matters for military personnel. In addition, legislation has beefed up protections for military members and their families from foreclosure actions, property repossessions and civil claims.
To boost the financial readiness of the armed forces, the various branches of the military are holding money management boot camps and other events in July in communities around the country as part of Military Consumer Protection Month.
While military life comes with extra challenges such as deployment and frequent moves that can have lasting financial repercussions, young service members are often the most vulnerable. Many new recruits join the military saddled with car loans, student loans and credit card debt, according to the federal Office of Servicemember Affairs, a division of the CFPB.
The consumer agency has fielded more than 74,000 complaints since 2011 from service members, veterans and their family members. More than 40 percent of the complaints dealt with debt collection practices. Other problems involved payday lenders, credit card companies, student loans, credit reporting agencies and mortgages.
The armed services provide financial education classes during basic training. But demands on a young recruit’s time often make it difficult for him or her to focus and absorb the lessons.
The Delayed Entry Program was created to fix these problems. It starts financial education training when a prospective service member signs a military enlistment agreement and ends at departure for basic training. The Servicemember Affairs division has also developed more online resources specifically for young people, including an interactive feature, "Misadventures in Money Management."
Check out additional financial resources at military.ncpw.gov and cfpb.gov. USAA, which provides financial services for military families and veterans, also has extensive resources at usaa.com.
But these resources won’t help unless basic money skills are a priority. That’s where parents can coach and motivate.
Financial regulators urge young military members to be wary of payday lenders and other businesses clustered around military bases that promote special rates and discounts for military members.
As one service member told federal regulators: “I live near a base, so all these businesses set up and sell their products advertising ‘we do military financing.’ They reel us in like fishes.”