Special Consumer Protections for Service Members and Their Families – NBC 7 San Diego
We all pay more for just about everything that worries some people about credit card spending and loan repayments. For service members and their families, there are special consumer programs that can help.
Federal agencies say young military members can be targeted with unique financial challenges because of their regular pay at an early age. This can put them in debt if they are not careful.
“As a kid, I didn’t know what credit was,” said Hector Cabrera, a retired senior airman. “Any car we bought, we bought it from a friend.”
Cabrera said that when 9/11 happened, he didn’t even hesitate to join the Air Force. While on active duty, he ignored his two credit card balances.
“I thought miraculously those credit cards would find out that I was gone and serving our country,” Cabrera said. “That wasn’t the case when I came back.”
Instead, he said he was taken in by collection agencies. He remembers his credit score dipping below 500, but he still left the base to buy a new truck.
“I didn’t know any better,” Cabrera said. “They were telling me I could have this truck, I said yes. I didn’t really calculate that it was 70% of my salary and the interest rate was 26%.
And Cabrera said that while working at the gate, he saw others doing the same thing.
“When vehicles are coming and you see a Honda Civic, you say it’s probably an officer,” Cabrera said. “When you see a brand new Lexus arrive, fully loaded, you’d say it’s probably an E-1. Nine times out of ten you’d be right.”
The Consumer Financial Protection Bureau says auto loans are a way for service members to get into debt quickly.
“They take these car loans and they have revolving credit at a much higher rate than those who have not used them,” explains Jim Rice of the CFPB.
Rice says with regular pay, they can qualify for credit they may not need or know what to do with. With all their focus on training and service, they can quickly lose control of their credit.
This is why the CFPB and the Ministry of Justice sent a letter this summer, reminding auto lenders of the protections in place for active duty military members. They understand:
- No interest rate higher than 6%
- Vehicle repossession protection
- Allow service members to terminate car leases early without penalty
“It’s so that they’re aware of it at the facility level,” Rice said. “So we’re sharing that information.”
If you or a family member are trying to learn more about finances during your service, the CFPB has set up an interactive website to help explain the financial scenarios and protections in place for service members.