According to the U.S. Department of Veterans Affairs, approximately 20,000 U.S. military veterans make up roughly 10 percent of the U.S. population with nearly half (47.1 percent) age 65 or over. Over the past half-century, the number of men and women on active duty has dropped significantly, from 3.5 million in 1968, during the draft era, to 1.3 million or less than 1 percent of all U.S. adults in 2017, based on PEW Research data. While those who answer the call to service make up an increasingly smaller slice of the overall U.S. population year-over-year, their contributions remain immensely impactful and deserving not only of our recognition and gratitude, but our protection as we take time to honor their service this Veterans Day. One way those of us in the financial services industry can help achieve this goal is by providing the tools, education and action steps to help veterans at all stages of life separate good information from bad to avoid the growing number of financial scams aimed at both active duty and retired veterans. That begins with a clear understanding of some of the unique financial issues veterans encounter.
Despite the unique benefits and opportunities that accompany military service, military families face numerous financial challenges both while serving and transitioning to civilian life. For example, frequent moves during active duty can make it difficult for military spouses to make inroads in their chosen careers, which can have an adverse impact on total household earnings over time. Managing finances during overseas deployments, especially for single personnel, can lead to late payment fees and credit score damage. While online banking and automated bill paying services have helped alleviate some of these challenges, unreliable, restricted or non-existent internet and cell service at more remote duty stations can make it difficult to monitor and follow-up on account activity and transactions on a regular basis.
While military pay scales tend to fall below civilian wages for comparable positions, benefits in the form of housing allowances, GI bill education benefits, zero down payment VA mortgage options, and military retirement system benefits can more than make up for the difference. That makes the combination of benefits and public policies critical elements in the nation’s long-term national security. Yet, active duty service members and veterans alike may find themselves more vulnerable to fraudulent practices going forward, especially when it comes to credit and debt management, due in part to a controversial proposal to roll back provisions under the Military Lending Act, a 2006 law enacted to protect active-duty military members and their families from financial fraud, predatory loans, and credit gouging.
According to recent reports from The New York Times and NPR, the Consumer Financial Protection Bureau (CFPB) under interim Director Mick Mulvaney, has proposed ending the supervisory examinations of lenders. Instead, the bureau would only be able to take action against lenders if it receives a complaint. This comes at a time when veterans are 9 percent more likely to engage in problematic credit card behavior—like carrying a balance and being charged a late payment fee, according to the FINRA Investor Education Foundation. Military veterans are also 40 percent more likely to be underwater on their homes and 28 percent more likely to have made a late home payment in the past year than U.S. civilians, based on the study’s findings.
At the same time, the Military Times reports that more service members could be at risk of losing their security clearances if they don’t keep on top of their finances, due to rule changes relative to the Department of Defense (DoD) security clearance process. Under the new guidelines, the Military Times states that officials will conduct “continuous” monitoring of federal employees who have roles in national security, including service members. Historically, individuals were up for periodic reviews every five to 10 years, depending on the type of clearance. The new, continuous evaluation will include a system that automatically pulls data on DoD workers’ financial and criminal records, and, eventually, data from social media. For service members with credit problems, this could have a significant impact on their careers.
According to a recent CFPB blog, the new process could prevent active duty military personnel from being deemed “deployable” unless service members can prove to DoD that they were the victim of identity theft, fraud or a mistake, and that they’re currently living within their means and are making a good-faith effort to resolve unpaid debts.
While protecting the financial well-being of both active duty and retired veterans should be paramount to all Americans, veterans remain a key target of scams and predatory lending practices due in large part to the stability of their government-backed salaries and guaranteed pension benefits. In fact, a survey from the non-profit
- According to the U.S. Postal Inspection Service, more fake charities are using names that sound real and authentic as a ploy to convince veterans to donate. These fraudulent organizations attempt to appeal to a veteran’s sense of duty and honor when soliciting donations.
- The SEC warned Thrift Savings Plan (TSP) participants about a fake federal benefits consulting group implying it was affiliated with and approved by the TSP.
- The Office of Personnel Management alerted federal workforce last year of an aggressive marketing campaign by companies offering cash payments in exchange for all or part of beneficiaries’ annuity payments.
- DoD studies over the past decade have found that service members, their families, and veterans are four times as likely to be targeted by predatory lenders.
In addition, the Federal Trade Commission (FTC) states that some financial planners and insurance agents try to convince veterans to buy insurance products or transfer assets to trusts so the veteran will qualify for VA Aid and Attendance (A&A) benefits. These so-called “veterans’ advocates” advertise that they can help vets qualify for A&A, with many making presentations at senior centers or assisted living facilities. Veterans who take the pitch are likely to end up without the promised extra pension benefits, disqualified from other government benefits, and stuck in an investment product that’s not in the veteran’s long-term best interests.
While this is far from a comprehensive list of fraudulent practices that threaten veterans’ financial well-being, it’s important for veterans and their family members to take steps to educate and protect themselves from those who clearly do not have their best interests in mind.
8 Steps Vets Can Take to Protect Their Financial Future – Now and In Retirement
Below are a number of steps and guidelines provided by the FTC to help active duty, newly-separated and retired veterans better protect their financial interests and well-being:
1. Remember that applying for veterans’ benefits is FREE. If you’re completing the application yourself, don’t pay for forms. If someone is helping you, know that the people who are accredited through the VA are not allowed to charge you to help you complete and submit VA paperwork.
2. Check for accreditation and licensing. Use this link to confirm that the person helping you is accredited through the VA. That means they’re trained to help with completing and submitting claims to the VA. However, it doesn’t mean the VA endorses the person’s products, advice, or ethics. Look into the licensing and professional status of the person helping you:
- For insurance agents:If you are considering buying an annuity, check with your state insurance regulator to confirm that the seller is licensed.
- For lawyers: Check with your state Bar Association to see if the lawyer is licensed in your state and whether there are ethical complaints on file.
- For financial planners: Anyone can call themselves a financial planner, but someone using the designation Certified Financial Planner must meet certain professional and ethical standards of the Certified Financial Planner Board of Standards. Determine whether an advisor is certified and whether any disciplinary actions have been taken or are on file. The National Association of Personal Financial Advisors can give you a list of planners that you pay directly (fee-for-service) rather than by commission on your purchases.
3. Know what’s in a name. The words “veterans” or “military families” in an organization’s name don’t necessarily mean that the group represents the best interests of veterans or their families. Some so-called advisors are dishonest and mislead veterans and their families to believe that they are veterans’ advocates representing a nonprofit or that they’re endorsed by the VA.
4. Do your homework. Check out an organization before you give it any money or do business with it in any way. Some deceptive “charities,” not-for-profit organizations, for-profit companies and advisors use names, seals, and logos that look or sound like those of respected, legitimate organizations. Often, you may see a small difference in the name of the organization from the one you mean to deal with: that’s your signal to ask questions and find out more. (Visit Charity Navigator or CharityWatch for independent ratings and evaluations of not-for-profit and charitable organizations, including the percentage of fundraising dollars that actually go to support the organization’s mission versus to telemarketers or organizations paid to raise funds.)
5. Consider any pressure to act fast as your cue to say no. If you decide to attend a presentation about veterans’ benefits, don’t spend any money until you’ve had time to think about the options, and play out as many potential scenarios as you can imagine. If the salesperson is giving you vague or evasive answers, walk away. This is not a person you want to trust with your money, your benefits, or your future.
6. You get to decide how to spend your money. Read all the papers and the contract carefully. Understand all the terms, conditions, and implications of what you are being asked to do. Get everything you discussed in writing. If something isn’t clear to you, ask for an explanation in writing. Take your time to review and consider all your options, including doing nothing. Discuss the possibilities with a trusted friend or family member. For instance, before an annuity contract is final, you get a “free look” period. How long the period lasts depends on state law. This is your chance to decide you don’t want the annuity, return the contract, and get your money back.
7. Beware of guarantees; there aren’t any. If an advisor guarantees or promises that they can help you get A&A benefits, forget about it. No one can promise that the VA will award you a benefit – even someone who claims to be VA-approved or accredited. Only the VA can do that.
8. Know where to get help. Finally, if you think an individual or organization is trying to sell you a bill of goods, contact one or more of the following to report the problem and/or file a complaint:
Transparency should form the core of any financial relationship, whether you’re working with an individual financial advisor or a large bank, brokerage or insurance firm. Remember, it’s your right to demand full transparency in these relationships to protect your family’s interests and financial well-being at every stage of your life and career. That includes knowing exactly who you’re dealing with, their credentials and all fees related to products or services offered. To learn more, read 10 Questions to Ask Your Advisor now.