Any consumer can become a victim of predatory lending, but when it happens to vulnerable military service members and their families, the practice is even more reprehensible.
The U.S. Consumer Financial Protection Bureau (CFPB) has taken notice and is helping target predatory lenders who take advantage of service members. And it is doing so through the leadership of someone well versed on both the military life and personal finance issues.
Holly Petraeus spent six years as the head of the Better Business Bureau’s BBB Military Line program. She now heads the CFPB’s Office of Servicemember Affairs.
She is married to former Army Gen. David H. Petraeus, the former commander of armed forces in Iraq and Afghanistan who now directs the CIA.
“As a lifetime military family member, I’ve seen first-hand the devastating impact financial scams and predatory lending can have on our military families,” Holly Petraeus wrote on the CFPB’s website.
Petraeus is making sure the CFPB backs up its words with action. She has coordinated communication channels between the bureau and Judge Advocate Generals (JAGs) from all the service branches to better respond to consumer complaints.
For example, Petraeus said: “We are now referring any military personnel or veterans who call the CFPB’s hot line claiming that they are in danger of foreclosure directly to the VA Home Loan Program.”
Here’s a recap of challenges facing service members, according to Petraeus:
Service members often can’t get a mortgage loan modification or short sale because they’re not yet delinquent. They can’t refinance for a good rate because it will no longer be considered their principal residence once they leave. “The Treasury Department has issued new military-related guidance for its Home Affordable Foreclosure Alternatives program, and Fannie Mae and Freddie Mac are tweaking their own guidance, as well,” Petraeus said.
There are concerns centering on military education benefits and for-profit colleges. “There have been cases of very aggressive marketing by for-profit colleges to military personnel and their families — of both educational programs and expensive private student loans,” she said.
Military members are often sold defective used cars at inflated prices with high-financing terms. When the cars break down, they are often sold another vehicle, with the existing debt rolled into another loan. “Although the CFPB will only have supervisory authority over the auto dealers who write their own loans, the Federal Trade Commission and the Federal Reserve are required to coordinate with my office on military auto issues, and they have started to do that,” Petraeus said.
Many consumers dealing with the economic downturn are facing new debt and end up on the receiving end of nasty debt collection calls. But attacks on service members have taken an especially vicious turn. “We’re concerned about potential violations of the Fair Debt Collection Practices Act,” Petraeus said. “We’ve heard reports of debt collectors calling service members’ units 20 times a day, threatening them with the Uniform Code of Military Justice, and telling them they’ll get them busted in rank or have their security clearance revoked if they don’t pay up.”
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