Because they are at high risk of predatory or fraudulent lending and debt collection, enlisted persons should be wary of high-pressure sales, said witnesses at a U.S. Senate Commerce Committee hearing on Nov. 20. Sen. Jay Rockefeller (D-W.Va.) called the meeting to address why military members have higher credit card debt and why they are more likely to use high-interest loans such as payday lenders.
Lawyer Dwain Alexander of the Navy's legal assistance office pointed out that "service members have been trained to trust authority." Lenders also may prey on military personnel who move around a lot and live on isolated bases and may lack the knowledge and experience that come from a stable community.
The Military Lending Act, passed in 2006, caps interest rates for service members at 36 percent -- but only on loans with a term of six months or less. The Tennessee attorney general sued electronics retailer SmartBuy, which set up outside Fort Campbell on the Tennessee-Kentucky border, for charging more than 300 percent of recommended prices and camouflaging it by promoting installment payments. The retailer also falsely advertised interest rates and used illegal collection practices, such as threatening to call superior officers.
In another case, the family of a soldier killed in Iraq received months of illegal harassment from a debt collector. Rockefeller expressed a desire to use his committee's subpoena power to force executives from companies like SmartBuy to testify before his committee.