I think a lot of people are surprised to think of the military as a target for… (Consumer Financial Protection…)
Reporting from Washington — Navy Petty Officer Tyson Steele needed to buy a new vehicle. But like some military members who borrow money, he said he was taken for a ride on the financing.
He signed a deal in December to purchase a used Chevrolet Silverado through a San Diego dealership loan at 6.9% interest, according to his attorney. A few days after Steele drove the pickup off the lot, the dealership said it was unable to secure financing.
If he wanted to keep the truck, he'd have to pay 9.99% interest.
"I had to refrain from saying what I wanted to say to those people," said Steele, 26, who was stationed at North Island Naval Air Station at the time. "I believe there should be an act … to protect military personnel against a scenario like mine."
Washington is trying to grant his wish.
The federal government has launched an initiative to prevent companies from taking advantage of young, often financially inexperienced service members.
To head the effort, it has enlisted Holly Petraeus, a longtime advocate for military families who said that as an Army wife she was once ripped off by an unscrupulous landlord.
"I think a lot of people are surprised to think of the military as a target for unethical business practices or abuses," said Petraeus, head of the military affairs office at the recently opened Consumer Financial Protection Bureau.
"But the fact is that they have an absolutely guaranteed paycheck; it comes in twice a month, and they're not going to quit or be laid off."
Those characteristics help make members of the military prime targets for shady salespeople.
The overhaul of financial rules enacted last year mandated that the consumer bureau have an office to protect service members, one of several federal initiatives in recent years aimed at defending the pocketbooks of America's fighting men and women.
The Obama administration tapped Petraeus, giving the new office a director deeply familiar with the military and one who carries a name that resonates throughout the armed forces community. Her husband is former Army Gen. David H. Petraeus, the former commander of armed forces in Iraq and Afghanistan who now directs the CIA.
Since being appointed this year, Holly Petraeus has been visiting bases to learn how the military educates service members and where it needs help.
In September, her office began seeking public input on financial products tailored to service members and their families so her aides could develop better financial education and outreach programs.
"She isn't just a figurehead. She's known about this for a long time, and I think that's really made a difference and given her credibility in the military community," said Mike Hire, director of the Camp Pendleton office of the Navy-Marine Corps Relief Society, a private group that provides financial education and assistance to military members.
Petraeus knows how some companies target members of the military, who often are handling their own finances for the first time.
"Military members move all the time, so they're constantly walking into new communities where they don't know the players," Petraeus said. "They may go for the biggest billboard outside the front gate of the base, which may not be the one that will treat them the most fairly."
Petraeus said she and her husband fell for a scam early in his 37-year military career — a slick brochure from a Columbus, Ga., apartment complex before he attended officer basic training at nearby Ft. Benning.
Based on the brochure, the Petraeuses agreed to a one-year lease without seeing the property, and discovered on arrival what she called "a terrible brick box of a place" in a high-crime neighborhood.
"We signed on the dotted line thinking we were being very smart that our lovely apartment would be waiting for us when we got there," she said. "Well it was, but it wasn't lovely, that's for sure.''
Since the Civil War, the federal government has taken steps to protect members of the military from legal and financial distractions while on active duty. They can get reduced interest rates on mortgage payments, protection from eviction in some cases and delays in bankruptcy and other legal proceedings.
Those rights were expanded in 2003 to prevent foreclosures on service members who are on active duty and to limit interest on mortgages to 6% during that period. In 2007, amid concerns that payday lenders were taking advantage of service members, Congress capped the interest rate at 36% for such loans to military members.
Still, Sen. Jack Reed (D-R.I.), a former Army commander, said financial challenges remain for military families. He pushed for creation of the new consumer agency office.
"There is, unfortunately, a very small group of businesses that try to exploit soldiers," he said.
Reed's effort ran into heavy lobbying from conventional auto dealers, who didn't want to fall under the authority of the consumer agency for loans they only arranged through outside lenders.