Members of Military Targeted by Predatory Financial Practices

Holly Petraeus and Beau Biden testify on the financial risks facing military

ByABC News
June 26, 2012, 4:38 PM

June 26, 2012 -- Some servicemen and women serving abroad have found themselves not only facings the danger posed to them by their enemies, but threats on the home front from predatory financial practices aimed at them and their families.

Two military advocates with famous political ties – Holly Petraeus, the wife of CIA Director Gen. David Petraeus, and Delaware Attorney General Beau Biden, the son of Vice President Joe Biden – testified before Congress Tuesday to discuss the progress made to protect 1.2 million servicemembers from becoming the victims of scams and defending themselves from financial risks.

From her conversations with servicemembers on 27 military bases across the country, Petraeus, who joined the Consumer Financial Protection Bureau in 2011 as assistant director of the Office of Servicemember Affairs, found housing concerns, from delinquent mortgage payments to looming foreclosures, are top issues confronting military families. Often times, the servicemembers are not equipped with the financial education to protect themselves against these issues.

Petraeus said servicemembers are targeted by aggressive marketing practices from institutions of higher education, most often for-profit universities, and hounded by debt collectors preying upon military men and women, even citing one case where a widow was forced to immediately pay a debt upon her husband's death.

"We've seen a lot of practices that are really not ok, where they will call their place of business, their unit, repeatedly. Sometimes they will threaten to have them busted in rank. They'll threaten them with military justice which isn't theirs to administer, and in one of the worst cases I ever heard, they even hounded a combat widow that she needed to pay the debt immediately from the debt gratuity that she'd received when her husband was killed in combat," Petraeus said in an interview with ABC News.

Petraeus described the problems facing servicemembers when they seek loans over the Internet, which often have high interest rates, as well as auto title loans, with some lenders tacking on exorbitant service fees. She recounted the story of a servicemember who sought a 32-month loan for $1,600, paying over $500 a month. By the time the loan was complete, the service fees amounted to $15,000, all for a $1,600 loan.

Biden, who serves as attorney general in Delaware and is a member of the Delaware Army National Guard in the JAG unit, told ABC News that scam artists tend to target people who are vulnerable, have a steady source of income, like members of the military, and who deeply trust others.

"They go to people who are taught to trust others and rely on others. Sometimes these young men and women who serve our country so heroically and so patriotically, they trust people, and sometimes they're not as, don't have as some of the background with how they should take care of their money, and they become susceptible to and vulnerable to people who are fraudsters and scamsters," Biden told ABC News.

Biden, who completed a tour of duty in Iraq in 2009, said in the hearing before the Senate committee on Banking, Housing and Urban Affairs, that he witnessed first-hand the additional pressures placed on servicemembers facing foreclosure or financial problems while they are serving abroad, and he pressed the government to enhance financial protections for soldiers and their families while they are abroad.