Ripped Off! Troops in the Crosshairs of Commercial Predators
During thirty years as a uniformed judge advocate and civilian attorney for the Marine Corps, I have learned that our enlisted troops, at great risk to dangers overseas, are also in the crosshairs of commercial predators at home. Although there is much work to be done, there is a growing realization at the state and national levels that military servicemembers are peculiarly susceptible to consumer harm, that they are targeted by commercial predators, and that this predation adversely affects servicemembers, their families, and our national defense. This realization has increasingly manifested itself in state and national policy and legislation.
The vulnerability of servicemembers, especially junior servicemembers, to commercial abuse stems from a confluence of factors. Our junior troops are young and have little sophistication with money, especially concerning complicated products like insurance, warranties, personal loans, and the purchase, finance, or repair of automobiles. They are especially transient, a circumstance that lends itself to rip offs tied to travel, such as unlawful security deposit withholding and inferior distance education plans of some for–profit schools. Transience also increases already high barriers to litigation. If you will soon be ordered across the country or across the world, do you really want to spend precious free time entangled in expensive, interminable litigation with an unpredictable outcome?
The positive character traits drilled into servicemembers during intense training can also be manipulated to separate our troops from the money. Patriotism and respect for authority can be perverted by the salesman who, like the commander, is older, more experienced and more knowledgeable then the young servicemember. Further, such a salesman may imply, subtly or not, that his product is endorsed or approved by the armed forces. The salesman may claim to be a former or retired service member who therefore ought to be trusted and respected. The seller may even pretend to be a representative of the government itself.
Our junior troops experience life as periods of intense, mentally and physically strenuous activity followed by brief periods of release. Such a frenetic schedule may lead some to impulsive purchases and self–destructive behavior.
Certain aspects of technology also increase troop vulnerability. Servicemembers are required to provide their personal information to a multitude of administrative units, increasing the risk of data breach and identity theft. Troops become accustomed to receiving instructions over the email and internet, increasing the likelihood of response to crooks soliciting a response, especially if the sender pretends to be a military authority. Our troops receive their pay by direct deposit from the Defense Finance and Accounting Service (DFAS) and maintain on line "MyPay" financial management accounts. Thus, at the push of a button, servicemembers can direct a portion of their pay to a charity, an investment, child support, or to a rip off artist.
There are also twisted schemes specifically adapted to military life. For example, a scammer may pretend to be a Red Cross worker notifying family members that a deployed servicemember has been gravely injured and permission is needed from the next of kin to make certain medical decisions. The frantic family member is then asked to confirm his identity by providing information that allows the scammer to steal from him. More recently, the FBI warned of a Syrian hacker group attempting to dupe servicemembers into providing information that would provide access to sensitive military databases.1
Troops are also targeted because they are easy to target. There is no great secret to locating large concentrations of young servicemembers. Look for large military installations, or clusters of installations such as at San Diego. Nor are the most junior troops hard to spot: Look for the young, fit looking man with a hair style short even by military standards. A military email address is relatively easy to guess, and fraudsters routinely send messages purporting to originate from military financial institutions, the very institutions military recipients are likely to have an account with.
The financial harm to servicemembers affects our national defense, preventing troops from devoting their full attention to important and dangerous duties. Do we really want that pilot in the ready room wondering whether his home is being foreclosed on? Do we want that lance corporal with his finger on the trigger worrying about his family getting evicted or his car getting repossessed? Further, financial instability is the most prevalent reason for loss of security clearance.
Education can help prevent or remedy victimization of troops; so can military friendly legislation, which is becoming more prevalent. Some examples:
North Carolina has enacted legislation specifically designed to prohibit the abusive, deceptive insurance and investment sales pitches that a handful of insurance companies have historically foisted on junior troops.2 On June 26, 2012, North Carolina Governor Pat McCrory signed house bill 971, giving bereaved spouses with a right to terminate their residential lease early in the event of the servicemember spouse's death, a right not provided by the federal Servicemember Civil Relief Act.3 Florida law goes further, extending lease termination rights not only in the event of the servicemember's death, but also in the case of relocation for over sixty days to execute temporary duty, or election to accept on base quarters.4
Effective January 1, 2008, California law extended lemon law protection to servicemembers even if they purchased their car in another state.5 Thus, the Marine who buys a car in South Carolina after boot camp and then transfers to Camp Pendleton, California, has a more viable remedy.
On the Federal level, the Military Lending Act (MLA)6 is an effort to prohibit lenders from engaging in some of the more outrageous practices on servicemembers and their families, such as the triple digit interest that characterizes payday loans, an industry that has long marketed to our troops. Comment has been solicited concerning plans to close up some of the loopholes in the MLA implementing regulation.7
The National Defense Authorization Act for 2014 enhanced some troop protections relating to interest rates, mortgage refinance, and foreclosure by revising sections 527, 533, and 556 respectively of the Servicemember Civil Relief Act.
There have also been some encouraging signs concerning enforcement.
- In June 2013, the Consumer Financial Protection Bureau (CFPB) issued consent orders concerning the Military Installment Loans and Educational Services (MILES) program, through which the defendants allegedly violated the Truth in Lending Act and otherwise deceived and mislead servicemember customers. The defendants were directed to refund $6.5 million.8
- On November 20, 2013, the CFPB issued a consent order directing a payday lender to refund $14 million, pay a $5 million fine, dismiss pending debt collection lawsuits, and correct credit information of 14,000 consumers for allegedly violating the MLA by overcharging, obstructing a federal investigation, and robo–signing litigation documents without due concern for their accuracy.9
However, there is a long way to go in terms of legislation, enforcement, and education to eliminate servicemember vulnerability and victimization. Troops need to be educated about obtaining assistance through military legal assistance attorneys, complaining to relevant civilian and military enforcement agencies, and avoiding the scams and bad deals in the first place. A more detailed account of the issues, rules, and resources available for fighting back is contained in my book, Ripped Off! A Servicemember's Guide to Common Scams, Frauds, and Bad Deals, available through ABA Publishing.
Michael S. Archer is the Director of Legal Assistance for Marine Corps Installations East, which is generally comprised of Marine Corps installations within the southeastern United States. The views expressed herein are those of the author alone and do not necessarily represent the position of the Department of Defense, the Marine Corps, or any other branch of the armed forces.
1 FBI Liaison Alert System Notice M–000018–PH
2 NC Gen Stat 58–58–320 et seq.
3 50 U.S.C. app. 501 et seq.
4 FL stat title VI, section 83:682
5 CA Civil Code section 1795.8
8 In the Matter of US Bank, File # 2013–CFPB–0003, June 26, 2013; In the Matter of Dealers' Financial Services LLC, File # 2013–CFPB–0004, June 25, 2013.
9 In the Matter of Cash America International, Inc., File # 2013–CFPB 0008, Nov 20, 2013.