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Protecting Those Who Serve:

How the CFPB Safeguards Military Members and Veterans from Abuse in the Financial Marketplace

by Gideon Weissman, Frontier Group and Ed Mierzwinski, U.S. PIRG Education Fund

Executive Summary

The men and women who serve in America’s military are also active consumers in America’s financial marketplace, where tricks and traps can cause harm to their finances and their lives. An analysis of more than 44,000 complaints submitted by active duty servicemembers and military veterans to the Consumer Financial Protection Bureau (CFPB) and contained in its Consumer Complaint Database finds that mistreatment of servicemembers by financial companies is widespread. The stories told in these complaints reinforce the importance of the CFPB’s work to hold financial companies accountable for wrongdoing, to secure restitution for mistreated consumers, and to help servicemembers and veterans avoid mistreatment in the financial marketplace.

The CFPB provides an invaluable service to America’s men and women in uniform. Attempts to weaken or eliminate the CFPB could put those who protect our country in harm’s way, both while serving abroad and here at home, and even threaten national security. The Pentagon has found that financial abuses and credit reporting mistakes can cause service members to lose security clearances, resulting in lower unit preparedness.

Servicemembers and veterans face unique challenges and threats in the financial marketplace.

  • Active-duty members of the military are often young, relocate frequently, and are frequently deployed overseas, making them unusually vulnerable to certain types of mistreatment in the financial marketplace. Servicemembers are also concentrated on military bases that can make easy and profitable targets for predatory financial companies.
  • Veterans may be targeted by predatory financial actors for their guaranteed income, because of loopholes in federal law, or based on physical or mental disabilities suffered while in service to the nation. Veterans may also be vulnerable to exploitation by companies representing themselves as friends of the military.

The CFPB is a critical ally for servicemembers and veterans.

  • The CFPB’s establishing legislation required the creation of an Office of Servicemember Affairs to focus on protecting members of the military and their families.
  • The CFPB has taken at least a dozen enforcement actions with specific benefits to servicemembers. In 2016, for example, the CFPB found that Navy Federal Credit Union had used illegal debt collection tactics, in some cases threatening to contact servicemembers’ commanding officers with information about their debt. As a result, the CFPB ordered Navy FCU to pay $23 million in redress to customers who had been wronged, along with a $5.5 million civil penalty. The CFPB has also taken action against for-profit colleges that used predatory tactics to recruit veterans.
  • The CFPB has also advocated to strengthen consumer protections for servicemembers, including by successfully advocating to close loopholes in the Military Lending Act, which caps interest rates on loans to servicemembers.
  • The CFPB provides valuable resources through its Office of Servicemember Affairs, including answers to servicemembers’ consumer questions.

Debt collection is the leading source of complaints by servicemembers and veterans to the CFPB.

  • Through April 2017, 14,123 debt collection complaints accounted for 32 percent of all servicemember complaints, making it the leading category of servicemember and veteran complaints in the Consumer Complaint Database.
  • Some complaints document a military-specific problem with debt collection: contact with commanding officers about the debt, which can undermine a servicemember’s military career.
  • The two companies with the most debt collection complaints by servicemembers and veterans –

Encore Capital Group and Portfolio Recovery Associates – were previously the subject of enforcement actions by the CFPB. The CFPB found that the companies purchased debt that was “potentially inaccurate, lacking documentation, or unenforceable,” and then “collected payments by pressuring consumers with false statements and churning out lawsuits using robo-signed court documents.”

Figure ES1. Top Words and Phrases Appearing in Servicemember Complaint Narratives

Complaints about mortgages, credit reporting, and bank accounts are the next leading complaint categories.

  • Many mortgage complaints concern veterans contacted to refinance their Veterans Affairs (VA) mortgages. A CFPB analysis from November 2016 analyzed complaints related to refinancing VA loans, and found that “[v]eterans report aggressive solicitations, misleading advertisements, and failed promises by lenders,” which can result in veterans refinancing their mortgages when it is not in their financial self-interest.
  • Another leading source of complaint is the category of “consumer loans,” which includes vehicle loans, pawn loans and installment loans. Vehicle-related loans account for a majority of all consumer loan complaints, when including complaints concerning vehicles leases and title loans.
  • More than 11,000 servicemember complaints are published with a narrative description – the story behind the complaint, in the consumer’s own words. The phrase “credit report” appears in 27 percent of servicemember complaint narratives.

Table ES1. Debt Collection Is the Leading Source of Complaints for Servicemembers and Veterans

Product Complaints Percent of Total
Debt collection  14,123 31.5%
Mortgage  11,201 25.0%
Credit reporting  6,414 14.3%
Bank account or service  3,853 8.6%
Credit card  3,660 8.2%
Consumer loan  2,758 6.2%
Student loan  1,509 3.4%
Payday loan  583 1.3%
Money transfers  305 0.7%
Prepaid card  278 0.6%
Other financial service  106 0.2%
Total  44,790  

 

Many servicemember and veteran complaints are submitted from areas near major military sites.

  • An analysis of 3-digit zip code areas finds that the areas with the most complaints tend to be located near major military sites. (The CFPB does not publish full 5-digit zip codes for all complaints.)
  • For example, 3-digit zip code 207, which contains the second-most servicemember complaints, is nearby a large number of military sites, including Fort Meade, Andrews Air Force Base, and the U.S. Naval Academy.
  • The states with the most servicemember complaints per capita are Virginia, Maryland, Nevada, Georgia and Delaware.
  • The District of Columbia has more servicemember complaints per capita than any state. The area surrounding the District of Columbia, with dozens of military sites and a large military population, is the main source of servicemember complaints for Virginia and Maryland.
  • In Nevada, the state with the third-highest rate of servicemember complaints per capita, most of the complaints are from the Las Vegas area, home to Nellis Air Force Base, one of the nation’s largest and busiest Air Force sites.

Complaint narratives reveal servicemember stories of mistreatment by CFPB-penalized companies.

  • Among companies penalized by the CFPB for servicemember-related wrongdoing, Wells Fargo, JPMorgan Chase, Navient Solutions and Navy Federal Credit Union have received the most servicemember complaints.
  • Navy FCU was penalized by the CFPB for making debt collection threats to its members, including active duty servicemembers. One consumer narrative alleges that Navy FCU threatened collection tactics that could damage their military career. “Prior to me closing my accounts out of pure frustration with them, I received several letters threatening to contact commanding officers. This threat alone would have put me in a situation where I wouldn't have been able to lead the men and women below me and likely end my career.”

Servicemember complaints have led to thousands of cases of relief. For most complaints it receives, the CFPB’s Consumer Response division sends the complaint to the company in question for review and response.

  • Through April 2017, 7,993 servicemembers had received monetary or non-monetary relief through the CFPB’s complaint process. (Non-monetary relief can include action like ending debt collection harassment.)
  • Of complaints that led to monetary or non-monetary relief, 30 percent were related to debt collection. Of these, 2,277 were closed with non-monetary relief, and 195 were closed with monetary relief.

To protect the men and women of America’s armed forces, policymakers must protect the CFPB. In addition to protecting the CFPB, state and federal policymakers should strengthen consumer protections, both specifically for servicemembers and veterans, and for all consumers. Debt collection harassment is of particular concern for servicemembers; policymakers should enact and ensure enforcement of stricter limits on debt collection agency contact with military commanders. Policymakers should also close the “90-10 loophole” that encourages for-profit colleges to recruit servicemembers and veterans using aggressive or deceptive tactics.

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