Breaking The Bad Financial Cycle

Article by Stacey Faris, Army Spouse and 2014 Yuma Proving Ground SOY

Every day it seems there is a story about another military family being dragged through the financial trenches. Sometimes it’s credit-card debt, but many times it centers around discount, pay-day, and title-loan companies.  Each story sounds eerily similar:  Younger enlisted family goes to buy something they believe they need, ends up with more than they bargained for, signs paperwork they didn’t fully understand or read, and the unscrupulous lender goes after them when payments are in default.

Most recently, USA Discounters solicits customers with offers of financing for furniture, electronics and other consumer goods. A quick visit to their site pops up the questionably predatory tagline of, “Bad Credit? Slow Credit? No Credit? No Problem!” The real kicker?  “Active Duty Military & Government Employees Are Always Approved for Credit.” You might ask, “How can a company that is willing to approve us for credit regardless of circumstances, really be bad?” The answer is quite sickening. It is written into their contracts that when you default they will sue you — in Virginia — even though USA Discounters is a national company. If you can’t appear in court, you lose. They have sued and won against almost 13,000 military families since 2006 because most are unable to attend court hearings in Virginia when stationed elsewhere.

In many cases, it’s hard to accuse lenders of anything other than detestable behavior. The contracts were signed, and once in default, they have every right to collect. Politicians have tried time and again to protect us from companies that prey on the military by legislating them away. However, as long as there is a willing market, these companies are going to find a way to make capitalize.

On average, American families carry $7,000 in credit card debt alone[i]. Pair this with mortgages, student loans, auto loans and/or medical bills and a decreased savings rate, the potential for trouble is very tangible. Perhaps even more disturbing, according to a new Urban Institute Study[ii], roughly 35% of adults in the US have debt in collections averaging over $5,000 owed per household. This number has stayed steady even though the total amount of credit-card debt held in the US has declined since 2009.

While the financial struggles and falling into financial traps are not unique to the military, we are a favorite soft target because of the guaranteed pay and ease of garnishing wages. When the FINRA Foundation released the results of its 2012 National Financial Capability Study[iii] it showed that while 57% of military respondents report no difficulty in covering their monthly expenses and bills, 49% of credit card holders regularly pay the minimum owed, pay late fees and over limit fees, and/or utilize cash advances from their credit cards. 43% have no rainy-day funds, and most concerning, 35% of the 1000 surveyed used non-traditional debt companies such as auto-title loan or payday-loan companies, rent-to-own stores or pawn shops.

With so much financial information and education readily available and with the unique ability the military has to teach within its units, one has to wonder: Why do we continue to allow our military families to be easy targets for these types of companies? Why are we not forcing ourselves to make better choices? And most worrisome when it is widely known that financial stressors are a leading cause of divorce and suicide, which have reached scarily high levels among the ranks, is our military leadership not taking extreme proactive steps to curb the problem from the inside?

We should hold ourselves to a higher standard than the general population. Just because so many others make poor financial choices doesn’t mean that we should sit idly by and watch our juniors and/or peers do the same. Letting them make financial choices that can harm their credit indefinitely, prevent them from getting ahead, and risk job security in a very secure line of work is unacceptable.

Let’s work together to teach. A few easy tasks that offer a hand up educationally and benefit financially could last a lifetime:

1. Share your story – If you’ve had a bad experience with a non-traditional lender, share it. Don’t be ashamed of your circumstances. Use them to prevent others from experiencing the same hardships.
2. Listen to those around you, especially the younger ones – If they are talking about buying something from a discount store, suggest using a laundry-mat for a washer and dryer, library for computers, and community centers for TV until they save up enough to buy outright. Suggesting they buy used is also a good alternative.  And don’t be afraid to step in if you hear someone has made a really bad choice. Some places allow you to return in a certain amount of time.
3. Watch for signs of financial hardship – Change in mood, embarrassment, and/or negative attitude at any mention of spending money. Know those around you enough to see if their behavior changes.
4. Know what resources are available for military families – The Service Relief Society, Red Cross, VFW, Operation Homefront, USA Cares, and so many more have ways of helping to support military families in times of need. Know what options are out there, and be ready to share when needs arise.
5. Lead by example – Just like having kids, those coming up through the ranks are looking to you for guidance. Show them that it’s OK to not have the newest, most expensive toys on the market unless you have the money to pay for them. Teach that budgeting allows you to spend without guilt, doesn’t prevent fun, and alleviates the worry about where your money is going.

Let’s take care of our own. Budget crunches for the government are not going to get easier in the near future. Let’s keep our families on a great financial path, so whatever trickles down our way doesn’t have to feel like the end of the world, and politicians don’t have to worry about these companies because we will have put them out of business on our own!