WASHINGTON - Defense Department leaders recognize that service members burdened with financial problems can't reach full mission effectiveness, and they've made strides to help, a senior Pentagon official told a Senate committee yesterday.
Army Col. Paul Kantwill, director of the department's personnel and readiness legal policy office, spoke before the Senate's Banking, Housing and Urban Affairs committee. Kantwill was part of a panel of witnesses that also included Holly Petraeus, assistant director of the Consumer Financial Protection Bureau, and Joseph R. "Beau" Biden III, Delaware's attorney general.
Kantwill, who worked for 22-plus years as an Army judge advocate, told senators that while congressional action has curbed troops' exposure to predatory lending practices, military financial counselors and legal assistance offices still occasionally see clients who have fallen victim to them.
Congress passed the Military Lending Act in 2006, authorizing DOD to regulate service members' use of certain "credit" offers that were actually high-interest loans. The department then restricted payday loans, vehicle title loans and tax-refund anticipation loans, Kantwill noted in his preparedremarks.
During his live testimony, Kantwill noted the department received a report in May from the Consumer Federation of America.
"The report concludes that the Military Lending Act has had the desired effect of curtailing the use of payday, vehicle title and refund anticipation loans by service members and their families," he said. "The overriding theme of the report, however, is that we have achieved much but we have much work to do."
The report and assessments from the field both indicate that lenders still target the military population with payday loans and auto title loans charging excessive interest, Kantwill said. There is also more online lending, often from "offshore" creditors not subject to the act, he noted.
"Yet another concern in the field is that automobile dealers, especially used car dealers and 'buy here, pay here' establishments, are using unusually high-interest loans," he added.
Mortgage foreclosures also remain a concern for service members and families, he said.
To help troops avoid or escape such financial hazards, the department has implemented an aggressive financial education program, and is committed to providing first-class legal assistance and working with other agencies and the financial industry," Kantwill said.
DOD's financial readiness campaign uses education, resources, programs, and protections designed to "alleviate financial stressors on the military to enhance family, financial and overall mission readiness," he said.
The primary financial readiness effort for legal assistance programs takes place where it's needed most, he said: to individual clients at the installation level.
"These include tip-of-the-spear services in all consumer law areas, to include [Servicemembers Civil Relief Act] issues, suspect lending and aggressive debt practices," Kantwill said.
The department and the military services are working with the Consumer Financial Protection Bureau and its Office of Servicemember Affairs, as well as with the Department of Justice and the Federal Trade Commission, to ensure service members' needs are met, he added.
DOD also stays engaged with the financial industry, and is designing a survey to gather current financial information from communities where service members are assigned, Kantwill said.
"The department is committed to our service members and our families, and we remain steadfast in supporting them in every way, especially as it concerns their financial futures," he said.
Petraeus noted during her testimony that service members who receive permanent change of station orders and must sell their homes now qualify by law for some "short-sale" opportunities, which can forgive mortgage amounts that exceed the sale price in markets where property values have fallen.
A recent settlement between the federal government, 49 states and the five largest mortgage servicers provides some short-sale opportunities for service members with orders to move, she noted.
"And last week, the Federal Housing Finance Authority ... announced that PCS orders are a qualifying hardship for a short sale," Petraeus added.
That means a service member on PCS orders, with a Fannie Mae or Freddie Mac loan for a property purchased on or before June 30, 2012, "will not be asked to make a financial contribution to receive the short sale or be liable for the difference between the short sale amount and the original mortgage amount," she said.
Petraeus added that her office also is working to help educate military members on student loan options, and is preparing a financial-training module that entering service members can access by smartphone or computer before they begin military training.
"A recruit in [the delayed-entry program] has more time and less stress than in basic training, and we think we'll better retain some 'just-enough and just-in-time' financial lessons," Petraeus noted.