Restoring American Financial Stability Act of 2010

Floor Speech

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Mr. REED. Mr. President, I take the floor today to talk about an amendment which I have been working on with Senator SCOTT BROWN of Massachusetts. I am very fortunate to have Senator Brown's help, insight, and advice because of his extensive experience not only as a public servant but as a member of the Massachusetts National Guard. As a lawyer, as a company commander, and as someone who has served in various capacities within the Guard, SCOTT BROWN knows from firsthand experience that young troops particularly, men and women of our Armed Forces, can be exploited by unscrupulous business practices, and that it is essential when we create a Consumer Financial Protection Agency that there be a particular and explicit liaison for military issues.

Many of these young men and women are not in their home towns. In the context of today's operations, they are returning from duty in Iraq or Afghanistan. They have not been spending a lot of money in Afghanistan because there is not a lot to buy, and they come home and they want to buy a new car or they want to do something, and they can be exploited. That exploitation is particularly hard to bear when it is at the expense of a young person who is risking their life in service to his country.

Senator Brown and I are working on a joint amendment which would create an office of military liaison within the Consumer Financial Protection Bureau. The office would educate and empower servicemembers and their families to make better and more informed decisions, and it would work closely with existing personnel with the Department of Defense and the particular services so there is not only a place to go with a complaint, but also proactive information to avoid some of these missteps.

It would help monitor and respond to complaints by servicemembers and their families, and it would also coordinate efforts among Federal and State agencies, and that I think is absolutely critical. You have local insurance regulators, you have local attorneys general, you have the Better Business Bureau, you have the Department of Defense offices. We have all of these things, but often, particularly for a young soldier, where to go and get comprehensive one-stop help is hard to figure out. Many times they will approach an office and they will be told, well, you have a good case but we don't do that, and they are sent away. Given the time and commitment they have to devote to their service, this is another burden they have to bear, and we hope we can reduce this burden.

Senator Brown and I are working to develop the details of this office. I think it is absolutely necessary.

We have looked at--and I have been looking at this problem for years now, and communicating with the Department of Defense, Secretary Gates, and others at the Department of the Treasury about how to protect better our service men and women. We think this initiative will help us in that regard.

The Department of Defense and the Government Accountability Office have found that servicemembers are particularly vulnerable to expensive and often abusive products. I will take off my Senate hat and put on my old company commander hat in a paratrooper company. You have 18- and 19-year-old men and women. They receive an enlistment bonus of sometimes $20,000. They don't have a home. They have bought the most expensive stereo equipment they already can buy. What they are looking for is something they can call their own, and usually that is a big, expensive car or truck. When they walk in the door, I think some of these dealers are aware of their vulnerability: lack of information, the short time they are back from an overseas deployment, the time before they are moving on to a deployment. So they are vulnerable. They are also vulnerable in another sense, not just with respect to products but there are so many families now where one of the spouses is in the military and the other spouse is in the military, and that other spouse is deployed overseas. So you have a member of the U.S. military with children, with a father or mother overseas, and they are struggling. Even with the pay they receive at the end of the month, it is a tough go. They are looking for good deals. There are too many people out there who are looking for people who are vulnerable to good deals. That is the reality today in the military. It is a different military force in terms of Operation TEMPO where I served where you were rather stabilized in one area for 3 years at least and then moved to another. Now you have families where the husband returns and 3 months later the wife deploys. That is a huge burden on the children, but it creates a kind of uncertainty and turmoil where financial problems are much more likely to occur. That is another factor of vulnerability, and we have to recognize that.

We also understand too that some of the more unscrupulous operators out there know these soldiers are getting steady paychecks, but they might not last all the way through the month. So they are a good sort of subject for some of these ploys. They have steady pay. You can go after them legally to try to attempt to do something, subject to the Servicemembers Civil Service Relief Act and all the other laws we try to protect them with. This is a target population in some respects, I hesitate to say, but unfortunately I think it is true.

The Under Secretary of Defense Clifford Stanley, who has been charged to be the champion for quality of life for protecting service families, has stated recently: ``The personal financial readiness of our troops and families equates to mission readiness.'' He reports that 72 percent of military financial counselors surveyed--these are the individuals at DOT, all the personnel whose job is to talk to troops about their well-being--72 percent surveyed had counseled servicemembers on auto lending abuses in the past 6 months. So this is not an isolated incident in one part of the country; this is across the country, across the Department of Defense, and that is a significant situation.

It is not just auto abuses. Payday loans, for example. As I said, anybody who is working around a military base knows that come the end of the month, that paycheck will probably be deposited into the checking account, so that is a good bet to lend money to. But the interest rates they are lending at, sometimes the APR is up to 800 to 900 percent. That is staggering. But they are doing it, and they are doing it to young soldiers who have their heads, some of them, looking forward to a deployment. Some of them have not even gotten over the last deployment, and we have to be conscious of that.

Rent-to-own loans. This is where you go to a shop and you say I would like to rent a TV for 30 days because you am deploying in 45 days. Then you don't deploy so you keep it, and in some cases you end up paying two to three times the retail price of the appliance. At least individual soldiers have to be informed of those practices and know about it. We have to be sure they are getting that information.

Refund anticipation loan is a classic. You are going to get your tax refund and if you let us give you a loan right now, we will take that tax refund. These turn out in some cases to have APRs reaching as high as 250 percent as you are borrowing against your prospective tax refund.

Automobile title pawns. Short-term loans are given to soldiers--and again, as a company commander, I never--well, let me see. It was more common to see a soldier in debt than to see a soldier investing in bonds and safe investments. It is the nature of being 18 years old, with some money and the feeling that you have to spend it. But automobile title pawns, short-term loans with very high interest rates to give the title of their car to the lender as collateral. Again, the whole notion to some youngsters in the military about what is a title, what is collateral, when they are looking at $2,000 or $3,000 on the table, that is only details. But when the time comes to pay the loan, they don't, and they lose their $25,000, $30,000 car or truck, and then it is a reality.

I think we have to be conscious of this. All of this is compelling in the abstract. It becomes even more compelling when you listen to the stories of individual soldiers.

Three years ago, Army SPC Jennifer Howard bought a car while she was stationed at Fort Riley, KS. As it turns out, the dealership that arranged her financing charged her for features on the car that she never got, such as a Moon roof and alloy wheels. You may say to yourself, how could anybody be so gullible? If you are a young soldier who just got back or is getting ready to go and you look at a shiny car and you know you didn't order the alloy wheels and Moon roof but you are not going to take time checking the manifest to see what you are charged with--that has been my experience. A dealer should know that, but apparently, in this case, they charged her anyway.

She says:

The dealership knows that we're busy, we're tired. We don't take the time, because we don't have a lot of time. It's like get in, get out, do what we got to do. If we get taken advantage of later we'll deal with it then.

SGT Diann Traina bought her car from a dealership that didn't actually own it. When it was repossessed, she was stuck with a $10,000 bill. She said:

Trying to concentrate on my job and the mission in Iraq and then trying to figure out stuff that's going on at home, it was really stressful.

She goes on to say:

If there's some type of regulation or agency that's out there to back you up, you know who to go to to complain about somebody if you're experiencing a problem.

That is what we want to do--coordinate these activities through a military liaison at a consumer financial protection agency. We want to do that because it is the right thing to do and because if we cannot protect the men and women who are protecting us, then we have to ask seriously whether we are doing our job. I know they are doing their job.

With that, I yield the floor.

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