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DoD Report to Congress on Predatory Lending Practices Directed at Members of the Armed Forces and their Dependents

DoD Report to Congress on Predatory Lending Practices Directed at Members of the Armed Forces and their Dependents. FDIC Conference Affordable, Responsible Loans for the Military:  Programs and Prototypes Wednesday, December 6, 2006. Report to Congress.

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DoD Report to Congress on Predatory Lending Practices Directed at Members of the Armed Forces and their Dependents

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  1. DoD Report to Congress on Predatory Lending Practices Directed at Members of the Armed Forces and their Dependents FDIC Conference Affordable, Responsible Loans for the Military:  Programs and Prototypes Wednesday, December 6, 2006

  2. Report to Congress • Consumers - input from installations and Defense Manpower Data Center (DMDC) • DMDC – under reporting • Installations – over 3,000 case studies • Industries - input from consumer advocates and academics • Service actions – input from installations • Education efforts • Use of the Armed Forces Disciplinary Control Board • Alternatives

  3. Research • Determining the use of payday loans • DMDC survey: 5% of force • CCRF survey: 13% of enlisted force • CRL calculation based on industry stats: 19% of force • DoD calculation based on industry stats: 17% of force • Amount of payday loans, based on DMDC survey: • 4.6 loans, rolled over twice – approximately 13 transactions • Average amount borrowed: $1,654 with average of $744 in fees • Total impact of $372 million borrowed and $167 million in fees

  4. Research

  5. Research

  6. Research Active duty Air Force E-5, assigned to Maxwell AFB, AL. A pattern of over-spending drew him to take out a title loan. He used his wife’s car as collateral. For a few months all he could pay was the fee to keep the account current, without paying any of the principal. When he missed two months of payments, the car was repossessed in the middle of the night. After the repossession, the title loan store reported that he still owed them $1,000. With this balance, as well as other credit obligations, the member decided to file for bankruptcy. In addition his financial difficulties resulted in him receiving disciplinary action.

  7. Research

  8. Findings • Common concerns • Department is tackling the issue through education and outreach • Alternatives are critical • Actions are making a difference • Use going down, problem exists in continuing over-extended credit

  9. Trend Analysis: E1 – E4 Self Assessment of Financial Condition Percentage answering question at right with responses 4 or 5 • Question: “Which of the following best describes your financial condition?” • Very comfortable and secure • Able to make ends meet without much difficulty • Occasionally have some difficulty making ends meet • Tough to make ends meet but keeping your head above water • In over your head Overall trend towards fewer Service members finding it tough to make ends meet or in over their heads.

  10. Trend Analysis: E1 – E4 Ability to Pay Bills on Time Percentage answering yes to one or more of the answers to the question at right • Question: “In the past 12 months, did any of the following happen to you (and your spouse)? Mark yes or no for each item.” • Bounced 2 or more checks • Failed to make a monthly/ minimum payment on credit card, AAFES, NECOM account, or Military Star card • Fell behind in rent or mortgage • Was pressured to pay bills by stores, creditors, or bill collectors • Had telephone, cable or internet shut off • Had water, heat or electricity shut off • Had a car, household appliance or furniture repossessed • Failed to make car payment • Obtained payday loan Fewer Service members reporting difficulty with maintaining finances

  11. Trend Analysis: Savings Behavior Percentage answering yes to answers 4 – 6 to the question at right Which of the following statements comes closest to describing the savings habits of you (and your spouse)? 1. Don’t save-usually spend more than income. 2. Don’t save-usually spend as much as income. 3. Save whatever is left over at the end of the month-no regular plan. 4. Save income of one family member, spend the other. 5. Spend regular income, save other income. 6. Save regularly by putting money aside each month. More Service members saving for future requirements

  12. Trend Analysis:Use of High Cost Loans Survey of All Service Members and E1 – E4 Service Members Percent responding yes to one or more answers • Payday loans • Rent-to-buy • Automobile title pawn • Tax refund anticipation loan Fewer Service members using high cost loans

  13. Financial Readiness • Service support is steady and growing • Education programs • Commander attention • Partner organizations are committed • Desire is still high • Understanding has increased • Service members continue to improve behavior

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