United States

FTC releases paper on financial issues of military consumers


The FTC held a workshop in July 2017 to examine the financial issues that military consumers, which include servicemembers, their families and veterans, may face. A primary goal of the workshop was to promote financial literacy and educate military consumers of the legal rights and remedies available to them under the Servicemember Civil Relief Act (SCRA) and the Military Lending Act (MLA).

The FTC issued a Staff Perspective on Feb. 2, 2018, that summarized the key takeaways from the workshop, which included concerns with purchasing and financing a car, dealing with debt collectors and making credit decisions. Issues may arise from the inability to shop around and compare credit deals or the pressure frequent relocations or deployments have on the consumer’s credit decisions. For example, servicemembers’ steady paychecks can make them attractive customers for dealers, while having no or minimal credit history means they may only qualify for less advantageous credit terms and higher interest rate financing.

Another concern relates to the issue of the servicemember falling behind on their payments. Debt-in-collection status or other negative credit information could adversely affect the servicemember’s security clearance. The FTC received over 103,000 complaints from servicemembers, veterans and their families in 2016, including complaints about scams targeting them.    

There are numerous rights that protect military consumers and their families, including the MLA which provides protections for servicemembers and dependents who apply for credit during active duty and the SCRA which provides protections on existing credit accounts for servicemembers who are deployed or on active duty.

The FTC has taken actions to protect military consumers through issuing enforcement actions, engaging in education initiatives, and coordinating agencywide efforts through its military task force.

In related news, the Department of Defense (DoD) issued additional guidance in December 2017 to comply with MLA provisions. The new guidance relates to obtaining and enforcing security interests on deposit accounts and clarified rules for automobile purchase loans and sale contracts. The guidance explains that while vehicle purchase loans are generally exempt from MLA coverage, if the contract includes add-on products such as Guaranteed Auto Protection (GAP) or credit life insurance, the loan is not exempt from MLA coverage.

What does this mean to you?

Financial institutions and other consumer lenders should be aware of issues military members, their families and veterans are facing. It is important to stay abreast of enforcement actions and educational or other publications the FTC or DoD releases. Servicemembers should be urged to seek military counseling services in advance of making critical financial decisions. Creditors should review their vehicle purchase loans with credit life or other add-on products to determine if they are covered by the MLA.