By Elaine Sanchez, American Forces Press Service
WASHINGTON, D.C. – Home ownership, military education benefits, car loans, spouse employment and indebtedness top the list of financial issues confronting service members and their families, a military finance expert said today.
In written testimony to the Senate Banking, Housing and Urban Affairs Committee, Holly Petraeus elaborated on military families’ most pressing financial issues and the steps her office is taking to better protect them.
Petraeus is the assistant director of the Consumer Financial Protection Bureau’s Office of Servicemember Affairs, a government office dedicated to protecting service members and their families from financial predators and pitfalls. She said she gained insight into these issues during extensive travels to military installations across the country, where she spoke to troops, families and military financial experts to identify their top concerns.
These visits only confirmed what she’d already seen firsthand as a military family member, military mom and a 37-year Army wife, she said. Her husband is CIA Director David H. Petraeus, a retired Army general.
“In my role as a military family member, I have seen the problems that can arise for our service members who may experience ‘too much month and not enough money,’” she wrote. “I have also seen firsthand the devastating impact financial scams and predatory lending can have on service members and their families. Unfortunately, there are still too many young troops learning about wise spending through hard experience and years of paying off expensive debt.”
Petraeus cited home ownership as one of top concerns for troops and their families due, in part, to what she called the nation’s “housing meltdown.” Faced with declining home values, people may find themselves owing more than their house is worth. They then find themselves in a difficult situation when notified of a pending military move, Petraeus said.
“Often, they can’t sell their home for enough to pay off the mortgage. They can’t rent it out for enough to cover their mortgage payments. They’re told they can’t get a loan modification or short sale because they’re not yet delinquent, and they can’t refinance for a good rate, because it will no longer be considered their principal residence once they leave,” she explained.
In some cases, service members who may have just returned from a deployment away from their families are choosing to proceed to the new duty station alone. But this separation, Petraeus said, is due not to mission demands, but rather to financial necessity.
Petraeus cited progress being made to better assist military families with housing concerns. The Treasury Department, she explained, has issued new guidance for its Home Affordable Foreclosure Alternatives program to make it more accessible to service members with orders to move. Government-sponsored enterprises such as Fannie Mae and Freddie Mac also are looking at adjusting their guidance, she added.
Another issue that’s affecting service members and their spouses is military education benefits and for-profit colleges, Petraeus noted.
For-profit colleges must obtain at least 10 percent of their revenue from sources other than Title IV education funds administered by the Education Department, she explained, and military education money counts toward that requirement.
“This has led to some cases of very aggressive marketing by for-profits schools to military personnel and their families,” Petraeus said. “And these schools often market not only the educational programs themselves, but also expensive private student loans.”
A key focus for the Consumer Financial Protection Bureau is to educate students about these loans, Petraeus noted, and to ensure they’ll be able to repay them.
Car loans are another pervasive issue for the military, she said. “Military personnel love their wheels, and they don’t always go shopping for them in the right places,” she added. Used-car dealers tend to cluster around the gates of military installations, Petraeus explained, and have been known to sell service members “clunkers” at inflated prices and with high finance charges.
Troops also are subject to “spot financing,” she added. They drive away with a promise of certain financing and later are told the financing fell through and they’ll have to pay more.
“Although the [bureau] will only have supervisory authority over the auto dealers who write their own loans, … the Federal Trade Commission and the Federal Reserve are required by [law] to coordinate with us on military auto issues, and we have already started to do that,” she said.
Military spouses have a distinct challenge with employment, Petraeus noted. Spouses in careers that require a professional license or certification run into issues when trying to renew their license at a new duty station. It’s difficult and expensive, she acknowledged.
Additionally, self-employed spouses find it hard to maintain a client base when relocating frequently, and spouses in rural areas are faced with a lack of available jobs.
“Those are problems I may not be able to solve, but I can certainly raise awareness about them as I work with federal and state agencies,” Petraeus said. The Defense Department, she added, also is working to improve spouse employment opportunities through its Military Spouse Employment Program.
Finally, indebtedness remains an ongoing issue for military members, she said. Service members often enter the military with debt, Petraeus noted. On a visit to Texas, she said, she was told the average Air Force recruit arrives for basic training with more than $10,000 in debt.
“Once in the service, military personnel don’t make a whole lot of money, especially at the beginning, but it’s a guaranteed paycheck in this time of economic uncertainty, and it’s subject to garnishment,” she said. “That has led to a whole lot of businesses looking to lend money to service members for various products, which are often overpriced to start with.”
This can range from a mall kiosk selling high-priced electronics at even higher financing to a rent-to-own furniture store to the latest installment loans that manage to exist just outside the definition of payday loans, she said
When service members fall behind in payments, lenders often are quick to turn them over to debt collectors, who may not always comply with the Fair Debt Practices Act, Petraeus said.
“They may call the service member’s home and unit 20 or 30 times a day,” she said. “We’ve even heard of a debt collector harassing a surviving spouse of a service member killed in action, insisting that she had to use the money from his death gratuity to pay the debt immediately.”
Petraeus said a key part of her job will be to educate service members of their rights under consumer financial laws and to equip them with the knowledge to make wise financial decisions. She cited several measures her office already has undertaken to protect military families’ financial wellbeing.
These include a recently signed agreement with the Defense Department, Petraeus explained, called a Joint Statement of Principles, with the judge advocate generals. The Consumer Financial Protection Bureau and JAGs from all service branches have agreed to share military consumer complaints to avoid any falling through the cracks.
Her office also has set up a working agreement with the Veterans Affairs Department, she said. They’re now referring service members and veterans who call the bureau’s hotline claiming they’re facing foreclosure to VA, even if they don’t have a VA-guaranteed loan.
“The VA has a very good track record of helping military homeowners avoid foreclosures and a thorough knowledge of what benefits might be available to assist military personnel or veterans in danger of foreclosure,” she said.
Petraeus said her goal is to ensure service members and their families, who devote their lives to protecting the nation, have a strong financial advocate.
“We will make every effort to achieve the goal of every military family being a financially educated family, armed with knowledge of how to avoid scams and poor financial decisions, protected by consumer laws as needed, and willing and able to invest toward long-term financial goals,” she said.