Frequent relocation, separation from family and friends, the stresses of deployment, and a steady paycheck from Uncle Sam can make military households an attractive target for scam artists. Ultimately, military service members and veterans deserve to be rewarded for their service, not disproportionately targeted for financial victimization.
How to Request an Active Duty Alert
Service members who deploy can place an active duty alert on their credit reports to help minimize their risk of identity theft. An active duty alert on a credit report means businesses have to take extra steps before granting credit in your name. Active duty alerts last for one year and can be renewed to match the period of deployment.
Step 1: Contact one of the three nationwide consumer credit reporting companies – Experian, Equifax, or TransUnion. The company you contact is required to notify the others.
- Request an active duty alert.
- Provide proof of identity, like a government-issued identity card, driver’s license, birth certificate, or passport. Only send these by certified mail.
Step 2: Mark your calendar.
- Active duty alerts last for one year. If your deployment lasts longer, renew the alert.
Step 3: Update your files.
- Record the dates you made calls or sent letters.
- Keep copies of letters in your files.
Identifying Common Scams
Military service members and veterans are no less vulnerable to the same types of scams and frauds that affect civilians every day. However, it is important to realize that some scams and frauds target military service members and veterans at higher rates. Recognize the warning signs to decrease your chance of falling victim to these risky situations, scams and frauds.
Automobile Purchase Scams
- Buy Here Pay Here used car dealerships target those with poor credit; they charge high monthly payments designed to make the buyer default, allowing the dealer to repossess and resell the vehicle.
- The Yo-Yo Scam occurs when a car buyer who finances the car through the dealer believes that the financing is final or is as good as final. The dealer lures the consumer back to the dealership, claiming that the financing has not been finalized or could not be finalized. The dealer then pressures the consumer to sign a new financing contract with a higher interest rate or with other less favorable terms. In order to avoid falling victim to this type of sale, a buyer should not pay a down payment, sign a purchase agreement, hand over the keys to a car, or drive the car off the lot until financing is finalized.
Catalog, Internet, & Phone “Sales”
Catalog, internet service, and phone card sales are all fairly similar scams whereby the victim agrees to pay a sum of money in the future in exchange for a “rebate” of cash and a product or service that is severely overpriced. The instances below provide examples of such scams:
- A past catalog sales scammer convinced victims to write a check for $455, which would be cashed on the victims’ next payday. In exchange, the victims received $350 cash and $105 in certificates to be used in the scammer’s catalog. However, the items in the catalog were so overpriced that the certificates were virtually worthless. Most certificates went unused by the victims.
- Internet service and phone card sales scams operate in a similar manner. Instead of writing a check up front, the victim commits to purchase internet service or phone cards for a period of time. In exchange for the purchase commitment, the victims receive a cash “rebate.” However, the catch is that the scammer’s internet service and phone cards are vastly overpriced compared to readily available, legitimate service providers.
Service members and veterans are often the subject of, as well as the target of, charity fraud. Service members and veterans have a great deal of support from the general public. Such support is often expressed by donations to nonprofit organizations working for the interests of service members and veterans. Some unscrupulous individuals create fraudulent charitable organizations in order to take advantage of the generous support of the general public. The organizers simply pocket the donations instead of using the funds to benefit service members and veterans.
Credit Repair Services
Credit repair services are rampant with fraud and misrepresentations regarding the help they can actually provide. In reality, there is very little that can be done to retrospectively improve a person’s credit. However, credit repair services often promise to do just that…for an upfront fee. These credit repair scams are particularity seductive to military members because, in the modern military, almost all duties require a security clearance and credit problems are the primary source of denials.
Misleading Marketing Practices
Affinity Marketing is a scam tactic that is often used in conjunction with the other common scams previously listed above. Businesses may adopt military-sounding names or hire former service members as salespeople, and some salespeople may even falsely claim that they are military retirees. The claimed associations and false representations are used to give the company a sense of legitimacy and authority. The use of former high-level officers to sell products is especially effective on more junior service members.
“Military” Newspapers involves the scam tactics of companies placing ads in newspapers such as ArmyTimes, NavyTimes, AirForceTimes, and MarineCorpsTimes. The papers and ads are found all around military installations and service members may incorrectly believe that they are affiliated with either the United States military or a governmental agency. The United States military does not oversee the advertising contained in these newspapers. In fact, the newspapers mentioned above are all publications of a publicly traded company and have no official relationship with the U.S. Government. Companies may simply rely upon the perception of affiliation, legitimacy, and oversight to generate sales through their ads.
Small Dollar, High Interest Loans
Small dollar, high interest loans such as payday loans, vehicle loans, and tax refund anticipation loans are notoriously risky for borrowers. These loans are typically made to borrowers experiencing cash flow difficulties. Although the fixed-dollar fees may not seem too costly at first glance, when translated to an annual percentage rate, the charges can add up to 300-1,000% interest or more.
Military veterans are entitled to a wide variety of benefits from the U.S. Department of Veterans Affairs. Scammers see these government benefits as an easy opportunity to make a quick buck at the expense of veterans. The two main scams in this area are “Advanced Funding” and “Bait and Switch Annuities.”
- Advanced Funding scams (also called benefits buyouts) are a way for scammers to take advantage of the short-term monetary needs of some veterans. The scammer offers the victim a quick lump-sum cash payment in exchange for a fixed stream of the victim’s monthly benefits payment. The lump sum payments are often substantially lower in value than the long term value of the benefits.
- Bait and Switch Annuity scams are multi-layered scams. Veterans and their families are targets for dishonest advisers claiming to offer “free” help with paperwork for pension claims. The scheme involves attorneys, financial planners, and insurance agents trying to persuade veterans over 65 to make decisions about their pensions without giving them the entire truth about the long-term consequences. Specifically, these unscrupulous brokers try to convince veterans to transfer their assets to a trust or to invest in insurance products so that the veterans can qualify for Aid and Attendance benefits. What the brokers don't reveal is that these transactions could mean that the veteran loses eligibility for Medicaid services and/or the use of his or her money for a long time.
Military Lending Act
The Military Lending Act (MLA) provides active duty service members with a variety of protections. The MLA was enacted to address the risks typically associated with short-term, high interest loans, such as payday loans. The MLA caps interest rates and limits the use of loan terms disadvantageous to the borrowers.
Additional information on the MLA may be found here.
Servicemembers Civil Relief Act
The Servicemember’s Civil Relief Act (SCRA) provides a wide range of protections for individuals entering the military, those called to active duty, or deployed service members. It is intended to postpone or suspend certain civil obligations to enable service members to devote their full attention to their duties and to relieve stress on the family members of those deployed service members. A few examples of obligations where service members may have special protections include:
- Outstanding credit card debt.
- Mortgage payments.
- Pending trials.
- Terminations of lease.
Additional information on the SCRA may be found here.
Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act (FDCPA) was passed by the U.S. Congress to protect against the use of abusive, deceptive, and unfair debt collection practices by debt collectors. Anyone, including military service members, can fall victim to these practices. Furthermore, service members are particularly vulnerable to abusive debt collection because failure to pay a debt can be punished under the Uniform Code of Military Justice. The FDCPA provides for a set of rights, remedies, and penalties with respect to debt collection.
- Debt collectors are prohibited from contacting any third party in connection with the collection of any debt.
- Debt collectors may not contact a debtor before 8:00 a.m., after 9:00 p.m., or at any time or place known or which should be known to be inconvenient to the debtor.
- Debt collectors may not communicate directly with the debtor directly if it knows the debtor is represented by an attorney regarding the debt.
- Debt collectors may not contact you at work if they’re told, either orally or in writing, that you do not want calls there.
- Debt collectors must cease most forms of communication with the debtor upon written request from the debtor.
- Debt collectors cannot harass, oppress, or abuse a debtor to compel payment.
- Debt collectors cannot repeatedly or continuously telephone a debtor with the intent to annoy, abuse, or harass.
Filing a Complaint
- In addition to filing a complaint with the Nebraska Attorney General’s Office, a service member suffering from abusive debt collection practices which may violate the FDCPA should file a complaint online with the Federal Trade Commission and the Consumer Financial Protection Bureau.
Additional information on debt collection may be found here.
AGO Consumer Protection Resources
- The United States Department of Veterans Affairs
- Personal Financial Management Programs
- Military One Source - Legal
- U.S. Navy Legal Assistance
- Coast Guard Legal Assistance
- Navy Federal Credit Union
- Army Emergency Relief
- Navy-Marine Corps Relief Society
- Air Force Aid Society
- Coast Guard Mutual Assistance
- The PenFed Foundation
- American Red Cross
- Consumer Financial Protection Bureau
- National Consumer Law Center Report on Scams Targeting Military and Veterans
- Better Business Bureau-Military and Veterans
- Military Consumer ToolKit