WASHINGTON, D.C.—During a hearing yesterday about abusive and illegal business practices aimed at members of the military, Chairman John D. (Jay) Rockefeller IV implored state and federal officials to continue their "all-of-the-above" efforts to stop bad actors from attempting to make a quick buck at the expense of service men and women and their families.
The Senate Commerce Committee heard from the panel of witnesses that soldiers, airmen, sailors, and Marines face predatory lending practices like payday loans and aggressive debt collection tactics that circumvent consumer protection laws. State and federal officials, including state Attorneys General and the Federal Trade Commission (FTC), branches of the military, and advocates all actively support servicemembers against these abusive practices, but many slip through the cracks. Rockefeller advocated for a combination of strong consumer protection and education to put an end to these horrible business practices and fully protect members of the military.
“You don’t know how people are going to take advantage of you until they’ve already taken advantage of you. I’m not sure it’s in the nature of 22-year-olds who are in preparation for going to war to absorb a discussion on smart financial practices. They’ll listen and they’ll learn – but will it make them sharp when confronted by these scumbags?” Rockefeller said. “You’re working so hard to get the word out and educate people so they can avoid some of these problems.”
Servicemembers, who are often young and inexperienced, are particularly vulnerable to aggressive scams, especially since businesses have figured out how to single out members of the military and exploit their steady paychecks and relative job security. For example, “payday loans” which take repayment from the borrower’s next paycheck, can carry annual percentage rates of 200-300 percent that are not transparent upfront.
Holly Petraeus, the Assistant Director of the Office of Servicemember Affairs at the Consumer Financial Protection Bureau (CFPB), has devoted her career to working with servicemembers to educate them about scams and the tools available to stop them. She said that a combination of her education efforts and consumer protection is the most effective means to protect servicemembers because these companies are good at preying on members of the military and are able to quickly move to other states when they are shut down.
“It’s very easy to change the name of your company. It’s a scourge and we have to educate people not to use them,” Petraeus told the Committee. “These folks are very persuasive – it’s what they do and it’s their model – and if they do get enforced against somewhere, they will go back to doing what they know how to do in a different state and under a different name.”
Tennessee’s Attorney General, Robert Cooper, has experience with companies moving from his state after he’s been successful in winning cases against them. In one instance, his office won a default judgment against Rome Finance for unlawfully targeting servicemembers and was able to shut the company down. But even then, Cooper noted, enforcement action is limited because the company moved to different states with different names and continued to prey on members of the military.
“Enforcement needs to be diligent – it has a great deterrent effect. Not only does it shut down the particular company you’re going after, it sends a signal to others in that business,” he said.
As Deanna Nelson, an Assistant Attorney General in New York, agreed that Attorneys General must be forceful in enforcement actions, she offered that a third option – in addition to consumer protection and educational efforts – would help state and federal agencies stop unscrupulous companies.
“There are some lapses – we need additional tools in our arsenal,” Nelson said. “These bad actors are very transient and very difficult to get ahold of. It’s like whack a mole – as soon as you get one of them they pop up in another state. We need to have a registry so we know who to locate so soldiers can protect themselves.”
Ultimately, soldiers, airmen, sailors, and Marines need to have information about potential scams and bad financial products to protect themselves. Dwain Alexander is a Legal Assistance Attorney at Naval Station Norfolk, Virginia, and works with sailors both before and after they’ve been targeted with predatory business practices. He agreed that education efforts should work in tandem with consumer protection enforcement.
“We educate them, they may fall prey, but afterwards if they can identify it and call someone, they can be the witnesses to bring a case,” Alexander said.
Rockefeller concluded the hearing by resolving to do more to protect men and women in uniform from unscrupulous businesses. He offered that options for moving forward include legislation that strengthens consumer protections for members of the military and their families, and emphasized the importance of continued collaboration between Congress and state Attorneys General, federal law enforcement and consumer protection agencies, and local consumer advocates.