Servicemembers

Did you know we’ve received more than 5,000 complaints from servicemembers, veterans, and their families? By and large, statistics for complaints submitted by the military track with those of the population at large. But these complaint statistics aren’t just numbers to us: they represent military members and their families and we know the impact consumer financial issues can have on their quality of life.

Read the report: A snapshot of complaints from the military.

In one complaint, an active-duty airman received permanent change of station orders in April 2012 – meaning he had no choice but to move – and tried to get approval from his mortgage servicer to sell his house in a short sale. In August, the company denied his request. He contacted his judge advocate to find out his rights; the judge advocate contacted the CFPB and learned about the guidance we had issued to clarify what mortgage servicers should do when contacted by a servicemember who has received PCS orders.

Based on that guidance, the judge advocate advised the airman to submit a complaint to us. We monitored the complaint and helped address the issues raised in the complaint. After previously denying the short sale, the company re-reviewed the airman’s request and approved it.

In another complaint, an active-duty army officer had been told by her student loan servicer that they were going to terminate her SCRA rights unless she provided a new set of orders that contained an end date. As an officer, she did not have orders with an end date, so the servicer terminated her interest-rate protection while she was still serving on active duty. The consumer complained to the CFPB and even before the complaint was routed to the relevant enforcement agency, a representative from the Office of Servicemember Affairs was able to communicate with the servicer and ensure the rate was reinstated.

We want to hear from active-duty, guard, reserve, retirees, family members, and veterans – the whole military community. And we want you to know you can contact us with questions or complaints about consumer financial products and services. We can’t guarantee what the results will be, but we will bring your concerns to the attention of companies, help address your complaints, and work with other federal and state agencies on improving consumer protection for the military.

I am proud to lead a team that works day in and day out on consumer financial challenges affecting military personnel, veterans and their families. We learn about their financial challenges by traveling to military installations across the country, talking directly to servicemembers, veterans and their families and by monitoring the complaints they submit to us, as those complaints can identify the pain points for military families in their consumer financial dealings.

To submit a complaint, visit consumerfinance.gov/complaint.

Did you know that there are now dating websites where potential partners provide their credit score for you to check out? People know it’s important to have good credit. But, there’s still a lot of confusion about how to actually build and keep a good credit report.

First of all, what is a credit report?

In a nutshell, it’s a report that looks at some of your bill-paying history, your applications for credit, and public-record information about you like bankruptcies, liens, and foreclosures.

Credit-reporting companies (the big three are Equifax, Experian and TransUnion) collect this information, organize it into reports, and sell the reports to businesses so they can make decisions about whether to lend to you, and at what rate. Businesses believe that how you’ve handled credit in the past predicts how you will handle credit in the future – and how risky it would be to take you on as a customer.

Based on your credit reports, you will be given a credit score by the credit-reporting companies. You don’t just have one credit score – each company does their own. And there can be other scores, too; the ones businesses use most are calculated for each of your credit reports using formulas from the Fair Isaac Corporation (FICO.) Lenders use these scores as a quick and convenient way to decide whether or not to do business with you, or on what terms. A low credit score can lead to things like your being turned down when you want to rent an apartment, paying a bigger deposit for a cell phone contract, or being charged a higher rate of interest for a car loan or credit card.

Don’t forget that credit reports are also sometimes used by employers to decide whether or not they want to hire you. And, the military looks at credit reports when deciding if you’re eligible to get or keep a security clearance.

So, what builds good credit?

• Pay your bills on time, every time. An automatic payment from your bank can be a good way to do that, but make sure you keep an eye on your balance so you always have enough in your account to cover the payment. You don’t want it to bounce.

• Don’t get too close to your credit limit. Credit scoring models look at how close you are to being “maxed out” on credit cards. If you use too much of your total credit lines, say by carrying big balances, you can hurt your credit score. Experts advise keeping your use of credit at no more than 30% of your total credit limit – some even say you should keep it at less than 10%.

• Don’t apply for too much credit in a short time. Your credit score may go down if you apply for or open a lot of new accounts in a short time. Buying something and want the discount that comes with opening a new store card? Transferring balances from an old card to a new one? Do that very often and it will show up on your credit report as lots of new credit accounts, which is likely to hurt your credit score.

• The more extensive your credit history, the better. Credit scores are partly based on experience over time. The more evidence you have on how you get and pay for credit, the more information there is to determine whether you are a good credit risk.

Here are some more ideas:

• Buying things with a debit card or cash will not build your credit score. Some people are afraid of getting into trouble with credit cards, so they vow never to have one. The problem is, buying things with cash or using a debit card doesn’t establish a credit repayment history that will be reported to a credit-reporting company. So when you do need a loan for a big-ticket item like a car or home, you won’t have the credit file to make a lender willing to take a chance on you.

• Pay with a credit card to build credit but try not to carry a balance and make sure you pay your bill on time. You’ll build credit by using your credit card even if you pay off your balances in full each month. And, you’ll avoid finance charges since these only kick in when you carry over a balance from month to month, which is what happens when you pay only the minimum amount due or any other amount less than the full balance owed each month.

• If you can’t qualify for a regular credit card, a “secured card account” that you put a deposit on can build credit, too. You can get a secured card from many banks or credit unions. With most of these cards your credit line starts out small, but as you demonstrate reliable payments, most companies will extend you more credit and eventually refund your deposit. Secured cards can be expensive and often come with a number of different fees, though, so before you resort to a secured card consider applying to see if you can be approved for a regular credit card with attractive features and pricing.

• File an “active-duty alert” with the credit-reporting companies before you go on deployment. This makes businesses verify your identity before they issue credit in your name and should help protect you from identity theft. If you want to go even farther, you can freeze your credit. A freeze prevents prospective creditors from accessing your credit file at all, which will keep any new accounts from being opened in your name. There may be a small charge to set up a freeze, unless you are a victim of identity theft. If you decide to freeze your credit, you’ll have to set up the freezes separately with each of the three big credit-reporting companies: TransUnion, Equifax, and Experian.

• Keep an eye on your credit reports. You can get a free copy of your credit report from each of the three major credit-reporting companies every year at www.annualcreditreport.com. There’s a chance you may find incorrect information that is bringing your score down. If you do, file a dispute with the credit-reporting company.

For more information about credit reports and credit scores visit Ask CFPB at www.consumerfinance.gov/askcfpb.

You might be surprised to learn that April 23rd is “Teach Children to Save” Day. Yes, there seems to be a special day dedicated to just about everything. But, compared to celebrations like “Talk Like a Pirate Day,” teaching your kids to become savvy savers can instill lifelong positive financial habits in them and be much less embarrassing for you.

So, let’s lay the most important card on the table first: Kids need to be taught to save. Like washing their hands or brushing their teeth, good savings habits are learned through repetition, consistent practice, and encouragement from you. Start as early as possible with simple lessons that help them understand the value of money, why it’s important to save it, and the difference between buying the things you want and the things you need.

Keep in mind that the best money lessons in the world will be useless if your kids don’t understand them. Make sure the lessons you are teaching are age-appropriate. Try talking to younger children about goal setting and spending choices…in their case, maybe saving up for a small toy or treat. As they get older, introduce more detailed concepts in ways that are relevant to them. Talk to older kids about savings goals like smartphones or cars, introduce concepts like compound interest, open a savings account and engage in fun money discussions with them on topics like the good and bad financial habits of their favorite TV characters.

Resources like Money As You Grow and MyMoney.gov can help you find out what saving and money lessons are best for children at different ages. The CFPB is also hosting a Twitter Chat on April 24th on the topic of talking to your kids about money. Parents can ask questions using #MoneyTalk, and our panel of experts will answer them.

Military life is filled with teachable moments that can help kids learn to save. Incorporate your real life experiences into their money lessons. Use major military events in your career like promotion, permanent change of station (PCS), deployment and transition or retirement as chances to demonstrate to children why it’s important to save, how you do it and potential consequences of doing it wrong…or not at all.

Give your children the opportunity to actually save and manage real money. Were you ready to handle money the first time you had an opportunity? Kids can’t learn to save properly unless they are actually saving. If you can afford it, give your kids a small allowance and let them gain experience making saving and spending choices. If an allowance isn’t an option, talk with them about your family’s monthly income and expenses where appropriate. Help them understand why you prioritize things like rent, food, utilities, college funds and retirement savings over other things.

Finally, you can’t teach kids the value of saving and other smart money lessons if you’re bad at managing money yourself. Get yourself smart about personal finance, so you can pass those lessons on to your children.
Whether it’s saving, home buying, debt management or consumer protection, there are lots of resources out there that can help you learn to make smarter financial decisions. You can get in-person information and assistance at your base Financial Program office. On the Web you can visit us, Military OneSource, Military Saves, SaveAndInvest.org, or other trusted resources that can help you learn how to save, manage your money and raise the next generation of great savers.

In case you missed it, we’re gathering information on how to build financial capabilities for people with disabilities, veterans in transition, and people who are economically vulnerable.

If you or your organization would like to contribute, please send us your comments by 4 p.m. ET on Friday April 12, 2013.

Americans with disabilities

CFPB is seeking information from community-service providers, financial institutions, research organizations, and potential vendors concerning strategies to build the financial capability of people with disabilities.

Veterans in transition and economically vulnerable consumers

CFPB is seeking information from organizations and vendors that have an interest and/or experience in providing financial coaching services, particularly to veterans and economically vulnerable consumers.

This blog post is part of a series for National Consumer Protection Week

When you buy something it’s hard to know if you’re getting the best deal – and that includes when military families, who are often targets for marketers, are making big financial decisions. Even though some companies might try to take advantage of people, there are things servicemembers can do to make sure they’re getting their money’s worth.

Have you ever bought something online and clicked the box that says “accept” without having any idea of what you’re actually accepting? Or maybe you looked at the fine print but it didn’t make any sense.

Or, you sit in an office with a salesperson who has a stack of paperwork for a product you’re financing. They give you a two-minute explanation of what it all means and ask if you have any questions. You say “no” because it’s embarrassing to say that you didn’t understand what they just said. And when they say “sign here” you do it. Congratulations! You’ve just bought an iPad for… $3,600?!!

So, what can servicemembers do when they’re confused at signing time?

• Get help.
  If you can’t make heads or tails of a contract, take it to someone who can: your installation Personal Financial Manager or JAG. If the seller doesn’t want to give you a copy of the contract before you sign, that’s a red flag; so is pressure to sign it “right now, while the offer is still available!”
• Don’t be afraid to step away and say you want to take time to think the purchase over.
  You are the buyer and you should be in the driver’s seat in this transaction. You are under no obligation to please the seller; don’t cave even if they act like they are disappointed or disgusted that you won’t commit.
• Think about the total cost of what you’re buying, not just the monthly payment.
  I can’t tell you how many times I’ve seen servicemembers sign up for what seems to be an affordable monthly payment, and then realize they’re paying an outrageous total price for the item. The $3,600 iPad I mentioned above is a true story. So is the story of the servicemember who signed a contract to borrow $1,600 – at a cost of $15,000 in finance charges!
• If someone says they only accept payment by allotment, consider walking away.
  Under federal law, a business generally can’t require consumers to make payments by automatic electronic payment, but there’s an exception to this that leaves out military allotments. When you pay by allotment directly from DFAS (Defense Finance & Accounting Service), it may be convenient for your creditor, but it means you miss out on protections that you might have had if the money was deposited in your bank account and then paid out from there (like not being required to pay by automatic electronic payments).
• Never give someone access to or control over your financial accounts unless they are someone you trust completely and there is a compelling reason to do so (like a power of attorney when you are deployed).
  Many scams on servicemembers, veterans, and their families have started with giving a persuasive acquaintance or “advisor” access to their accounts.

The term “buyer beware” goes all the way back to the Roman era: caveat emptor. Take a hint from Caesar and his legions and protect yourself from getting into a bad deal. But if you do feel that you’ve been scammed or treated unfairly, come see us at consumerfinance.gov/Servicemembers.

We are here to help!

Sometimes people in the military have interesting beliefs about things that impact their finances. Sometimes they’re correct; sometimes they’re partially true; and sometimes they’re just flat wrong. Check out the statements below – hit or myth?

“Shopping around for a loan will kill my credit score.”
This one is a myth – sometimes. When you apply for or inquire about getting a loan, a lender will request a copy of your credit score from the major credit bureaus (that’s called a hard inquiry.) And usually, each hard inquiry will cause a small reduction in your credit score because it can be a sign that you have taken on a new debt that hasn’t shown up yet on your credit report – which would make you more of a credit risk. But, the major credit bureaus and their score providers have made an exception if you’re shopping for an auto, home, or student loan. In that case, they treat multiple hard inquiries within a short period (it varies from 14 to 45 days) as a single inquiry, since they understand you’re just looking for the best deal, not planning to take out ten new loans. So, shopping around for a few weeks for a car, home, or student loan shouldn’t have much effect on your credit score.

“If I buy something, I am guaranteed a 36-hour “cooling-off period” where I can change my mind and cancel the deal.”
This one is mostly a myth but there are a few transactions that may have a cooling-off period. The Federal Trade Commission’s Cooling-Off Rule generally gives you three days to cancel purchases of $25 or more if the sale was made at your home, workplace, or dormitory, or at facilities rented by the seller on a temporary or short-term basis, such as hotel rooms, convention centers, fairgrounds, and restaurants. Federal law also provides limited cancellation rights for some types of mortgage loans and student loans, and state law in some states might have cooling-off periods relating to real estate deals, such as apartment leases.
In the vast majority of cases, though, once you’ve bought it, it’s yours right away and there’s no going back in a few days and saying “I’ve changed my mind.”

“I have to be behind on my mortgage payments before I can apply for a loan modification or short sale on my house.”
If you’re in the military, this is now a myth in many cases. The Department of the Treasury, the Federal Housing Finance Agency, and the government-sponsored enterprises Fannie Mae and Freddie Mac have all changed their guidance to say that a military permanent-change-of-station move qualifies you to apply for a loan modification or short sale even if you’re not behind on your mortgage payments. Be sure to mention your military status and PCS orders when you talk to your lender!

“If I enter active duty with student loans, the thing to do is ask for a military deferment on the loans so I don’t have to pay.”
I’d call this one a myth in most cases. Unless it’s a subsidized federal student loan, the loan will keep accruing interest even though you’ve deferred payment, and you’ll end up owing even more (maybe a lot more) by the time you leave active duty. Consider this instead: no matter what type of loan it is (federal or private) under the Servicemembers Civil Relief Act, you could ask your loan servicer to reduce your interest rate to six percent while you’re on active duty. And if it’s a federal loan, you could also sign up for Income-Based Repayment so your monthly payment’s affordable, and you could count your payments towards Public Service Loan Forgiveness and be done with the debt after 120 qualifying payments.

“I can get a free copy of my credit report from each of the three major credit-reporting agencies every year at www.AnnualCreditReport.com.”
This one’s a hit! www.AnnualCreditReport.com is the official site to get a free copy of your credit report once a year from Equifax, Experian, and TransUnion. Other websites – including FreeCreditReport.com or CreditReport.com – are not.

“If I have a bad credit report the first thing I should do is pay someone to fix it.”
Myth! If there are mistakes on your credit report, you can contact the credit bureau – or the company that provided the information – yourself and request they be fixed. But if the negative information on your report is legit, then only the passage of time will make the bad info disappear – you can’t speed up the process and neither can a credit repair company.

“If I am deployed to a combat zone, the government offers a savings account that earns ten percent interest while I am deployed.”
Hit! The Savings Deposit Program will earn ten percent APR on up to $10,000 while you are deployed to a combat zone. You can set up the account through your unit’s finance officer once you are deployed.

“The CFPB can fix all my financial problems.”
Sorry, that’s a myth! But we can help you with many of your consumer financial issues. Come see us at consumerfinance.gov/Servicemembers and learn what we do!