Protecting Our Service Members and Veterans
Special consumer protection advice for the special Iowans who serve or have served in our military
Iowans who bravely serve our country through the active military, the National Guard or Reserves, military veterans who served, and their families, can get singled out by scam artists and disreputable businesses.
Active duty service members are sometimes targeted because of their reliable income and their likelihood to relocate or deploy. Bad actors people take full advantage of service members who fear that reporting a financial problem—even if it was the result of deception, fraud or unfair practices—may affect their military career.
Veterans can be targeted through VA benefits or pension scams, investment scams and dubious “special offers for vets only.”
Scams Affecting Active Duty Service Members and Families
- Military Paycheck Allotments: Some of the most common scams that have traditionally affected active duty service members are those that sought to tap directly into military paycheck allotments, or designated amounts of money that are automatically distributed to a service member from his or her pay.
Unscrupulous lenders would abuse the allotment system by selling, establishing rental or lease agreements, or extending loans with service members and their families for items such as vehicles, electronics, appliances and furniture. The merchandise would be offered at high prices, or the seller/lender would impose unreasonable and perhaps even illegal terms, fees and interest rates.
Recently, for their protection, the U.S. Department of Defense prohibited service members from setting up allotments for personal property. But service members can still use allotments for uses including financial account deposits, investments, dependent support, insurance premiums, mortgages, rents, Combined Federal Campaign (philanthropic) contributions, and U.S. government debt repayments.
- Payday Loans and Cash Advances: Payday loans and cash advances are generally associated with high interest rates and fees. A consumer credit lender cannot charge service members (including National Guard members on national duty) or their families an annual percentage rate higher than 36 percent. These include payday loans, car title loans (which are illegal in Iowa), and refund anticipation loans.
- College Loans: Some for-profit schools may be more interested in seeking GI Bill payments than seeing that a service member receives the education he or she needs for a particular career. While all prospective students need to do plenty of research before enrolling in a higher education institution, service members need to be particularly vigilant. Some for-profit colleges have aggressively and deceptively recruited service members and veterans to enroll in high-priced, low-quality programs. The U.S. Department of Veterans Affairs provides helpful information at www.benefits.va.gov/benefits, and the U.S. Department of Education’s College Navigator provides helpful information at https://nces.ed.gov/collegenavigator.
Scams Affecting Veterans
- Pension Advance Products & Pension Scams: These are offers for “free help” with pension-related paperwork, or lump-sum payment offers to military veterans. In some cases, a veteran might receive a large up-front payment, but in the end may receive only a small amount of what he or she would have earned had they waited to receive full pension payments. In other cases, unscrupulous brokers, insurance agents, attorneys or financial planners may convince veterans to sign up for benefits that may cause them to lose eligibility for Medicaid services or cause other long-term financial setbacks. Never give a creditor access to the account where your benefits are deposited.
- “Special Deals” for Veterans: While some patriotic businesses truly want to thank veterans for their service through special offers, others may try to take advantage of them. Whether it’s a loan, rental or purchase, veterans should research any “special deal” for vets before committing.