Debt Management for Military Consumers

U.S. troops should arm themselves against debt-relief schemes, scams

Members of the U.S. military — and their families — have enough to worry about without losing sleep about their financial lives. Sadly, like the civilians whose freedoms they defend, American troops are not immune from mismanaged debt — nor, worse, from sneaky “debt fixers” who often make matters worse.

Studies indicate active-duty personnel are substantially more susceptible to scam artists than civilians. That might be why the entrances of so many military bases are crowded by payday loan, car title loan, pawn and other “easy” money shops, which exchange quick infusions of cash or credit with steep interest rates, unnecessary add-ons, harsh penalties, and relentless collections operations. Indeed, military debt relief often provides no relief at all.

Our culture abounds with temptation to spend. When we overdo it, the stress leads to unhappiness, arguments, family crackups, frustration and worse.  For troops who badly mismanage their finances, there’s the added worry of facing court-martial.

Small wonder service personnel sinking in financial quicksand grasp at quick-fix debt-relief straws. In a word: Don’t. There’s plenty of honest help, some of it even arranged by the federal government, for active-duty troops who find themselves in troublesome debt.

Debt Relief You Can Trust

Servicemembers Civil Relief Act

We mentioned federal government help for U.S. troops. Now, the reveal: The Servicemembers Civil Relief Act provides assorted protections for active-duty personnel who are away from home, including defense against foreclosures and evictions, vehicle repossessions, being taken to court over civil liabilities (including divorce and child-support hearings), or having your possessions seized and sold by the owner of a self-storage facility.

The act also excludes certain active-duty personnel and their spouses from paying state and local income taxes in certain cases.

Granted, these are narrow (but valuable) protections for a slender class of service members. What’s available for home-based military personnel who triggered a debt avalanche the old-fashioned way? Glad you asked.

The DIY Option to Pay off Your Debt

There’s the do-it-yourself (DIY) option, in which you write up a (possibly draconian) budget, account for every last penny, and commit to paying everything down (or off) in a certain amount of time.

The DIY method demands extraordinary discipline, but can be aided by one of these options:

  • Contacting each of your creditors to explain your situation and seek better terms
  • Landing a debt-consolidation loan at a reputable financial institution (such as a bank, credit union or online lender)
  • Transferring debt to one of those low-to-no-interest credit cards. Just be sure you’ve paid off the transferred balance before the introductory period is over.

Veterans Administration Low Interest Loans

The Veterans Administration, famous for its no down payment home mortgages, also offers low-interest programs for debt-consolidation to veterans and active-duty personnel.

Nonprofit Credit Counseling & Debt Management

If, on the other hand, you’re wary about going it alone, but you’ve been in the military long enough to treasure the expertise of those in fields unfamiliar to you, you’re definitely ready for debt-relief insights provided by a nonprofit debt consolidation company.

Credit counselors don’t make judgments; they’ve heard far worse stories than yours. They are nonprofits, which means they are here to improve your bottom line, not their company’s.

Instead, they help you navigate your way back to good financial health via strategies appropriate to your unique circumstances.

Credit counselors ask you questions about income and expenses; help you design a realistic budget; and offer solutions that are appropriate to your situation.

The experts at nonprofit credit counseling agencies know better than most, the particular needs of America’s military personnel, from active duty to honored veterans. The right counselor will design, and help you execute a debt-relief plan you can live with.

The debt solutions they offer require discipline and perseverance. Most plans take 3-5 years to eliminate debt.  You didn’t get into debt overnight so you can’t expect to get out of debt overnight, either.

Other Sources for Debt Help

One of the side benefits for military personnel is that you qualify for membership and services at credit unions and some banks that make it easier to stay out of a financial pinch.

The largest credit union in the country is the Navy Federal Union, which is open to members of any branch of the military, their relatives and employees of the Department of Defense.

The Navy Credit Union has extremely low rates on auto loans (as low as 1.79%), offers no-charge access to thousands of credit unions and ATMs in North America and charges only $1 for overseas transactions.

If, for some reason, you prefer a bank, USAA bank is highly rated for its interest rate discounts for active duty members; a credit card offering 5% cash back on the first $3,000 of gas and military base purchases every year and getting paid a day early with direct deposit.

How to Avoid Scams

Like civilians, a lot of servicemembers could avoid financial problems by exercising better judgment in situations that look like just what they are: scams.

We already mentioned some of the traditional places people in debt go and, often, wind up getting fleeced. They’re right outside the gates. Anymore, however, you don’t have to leave the base to make a bad situation far, far worse. These days, insidious financial snake-oil salesmen are as near as your Internet browser, email inbox, or even your smartphone.

In 2017, the Federal Trade Commission fielded more than 113,000 reports of fraud or attempted fraud from military-related consumers in various stages of service — active duty, Reservists, National Guard, veterans and families.

Like the general population, identity theft and imposter scams were among the top areas of abuse. From the report:

“Imposter scammers pretend to be someone you trust to convince you to send them money or personal information. Some pretend to be from the government or from a business with technical support expertise. Others like about being your online lover or say there’s an emergency with your family member.

Scammers wouldn’t try these tricks if they didn’t work. Military consumers were, curiously, more gullible than the general population, being suckered out of $25 million, suffering a median loss of $699, compared to $500 for civilian consumers.

Don’t be a soft touch. Government agencies — federal, state, or local — never call looking for quick payment. Neither do they ask for wire transfers or (we are not making this up) payment via gift cards. That’s never, as in NOT EVER!

Now, those are just run-of-the-mill scams, which are as easy to spot as Nigerian oil-rich princes hoping you, honest American, will supply bank routing information — in exchange for a healthy cut — to help them move millions in inherited petrodollars from an offshore account to the safety of the West.

Additionally, the Army Criminal Investigation Command has lately been warning against so-called sales and advance-fee schemes. Long fraud-scheme story short: Anybody who promises to deliver something after it receives your cash transfer is acting in bad faith.

Then there are debt-relief scams, which sound — where have we heard this before? — too good to be true. Beware cold callers who claim they can trim or eliminate your debt, and/or reduce the interest you’re paying on credit card debt, but need an upfront payment, often ranging from $200 to $600, to start the magic.

Oftentimes, these scammers will do little more than provide a list of credit cards with low- or no-interest introductory provisions, a list you can find yourself with a rudimentary internet search.

The bottom line is that if you experience even the slightest bit of doubt about a financial solution offered to you … slow down. Take a step back and either consult with the financial adviser on your base or go online and find a nonprofit credit counseling service.

Don’t get sucked in by a “quick-fix” solution that was years in the making.


Sources

NA (NA) Article 134 — Debt, Dishonorably Failing to Pay. Retrieved from https://www.jordanucmjlaw.com/articles/article-134-debt-dishonorably-failing-to-pay/

Kirchheimer, S. (2011, Nov. 11) Scammers Take Aim at Vets and Those Who Support Them. Retrieved from https://www.aarp.org/money/scams-fraud/info-11-2011/scammers-target-veterans.html

Panzino, C. (2018, Feb. 24) New online scams target soldiers, Army warns. Retrieved from https://www.armytimes.com/news/your-army/2018/02/23/new-online-scams-target-soldiers-army-warns/

Vaca, M., 2018, March 9, Military Consumers and Sentinel: A deeper dive. Retrieved from https://www.consumer.ftc.gov/blog/2018/03/military-consumers-and-sentinel-deeper-dive

Detweiler, G., (ND), Don’t Be the Victim of a Debt Relief Scam. Retrieved from https://www.military.com/money/personal-finance/credit-debt-management/dont-be-the-victim-of-a-debt-relief-scam.html

NA (ND) Know Your Options to Get Out of Debt. Retrieved from https://www.military.com/money/personal-finance/credit-debt-management/know-your-options-to-get-out-of-debt.html

NA (ND) SCRA: Servicemembers Civil Relief Act Overview. Retrieved from https://www.military.com/benefits/military-legal-matters/scra/servicemembers-civil-relief-act-overview.html

NA, ND. Benefits For The Military. Retrieved from https://www.usaa.com/inet/wc/ent_member_benefits_landing_mkt?akredirect=true