Agencies Create Database to Protect Troops, Quell Swindlers

WASHINGTON — Their pres­ence out­side mil­i­tary bases has become all too famil­iar: busi­ness­es ped­dling cars, elec­tron­ics and oth­er items with undis­closed con­di­tions or sky-high inter­est rates that quick­ly become a finan­cial night­mare for ser­vice mem­bers.

Today, the Con­sumer Finan­cial Pro­tec­tion Bureau announced as one of its first orders of busi­ness that it is part­ner­ing with the Fed­er­al Trade Com­mis­sion to put a stop to such scams.

The bureau, which was cre­at­ed to con­sol­i­date finan­cial reg­u­la­tors and pro­tect con­sumers, has cre­at­ed a nation­al data­base to share between state and fed­er­al law enforce­ment with infor­ma­tion about com­pa­nies that tar­get mil­i­tary mem­bers for con­sumer and finan­cial fraud.

Richard Cor­dray, the for­mer Ohio attor­ney gen­er­al whom Pres­i­dent Barack Oba­ma appoint­ed as direc­tor of the bureau ear­li­er this month, said coor­di­na­tion among law enforce­ment agen­cies — and their input — is crit­i­cal to pros­e­cut­ing scam artists who prey on ser­vice mem­bers and their fam­i­lies.

The data­base — dubbed ROAM for Repeat Offend­ers Against the Mil­i­tary — is acces­si­ble only by law enforce­ment, and is an exten­sion of the FTC’s Mil­i­tary Sen­tinel Net­work, a pub­lic web­site where peo­ple can report scams against ser­vice mem­bers, Cor­dray said.

New York Attor­ney Gen­er­al Eric T. Schnei­der­man, who attend­ed today’s announce­ment, came up with the idea for the data­base after fil­ing a law­suit in 2010 against Rome Finance Co. of Con­cord, Calif., for defraud­ing near­ly a thou­sand sol­diers at Fort Drum, N.Y., as well as ser­vice mem­bers in at least five oth­er states. The com­pa­ny agreed to repay $3.5 mil­lion to the Fort Drum sol­diers and restore their con­sumer cred­it rat­ings in a legal agree­ment reached in August.

Schnei­der­man called the case “one of the most egre­gious things I’ve seen in my time” in which the company’s retail­er, Smart­Buy, sold lap­top com­put­ers at high­ly inflat­ed prices to ser­vice mem­bers. Under the scam, he said, ser­vice mem­bers were forced to use the company’s financ­ing plan, which was paid direct­ly from their mil­i­tary pay­checks with inter­est rates that even­tu­al­ly hit 19 per­cent. Some sol­diers end­ed up pay­ing more than $7,000 for a com­put­er worth no more than $2,000, he said.

The Fort Drum sol­diers were par­tic­u­lar­ly vul­ner­a­ble, Schnei­der­man said, because the base was “an extreme­ly active jump­ing-off point” for deploy­ments to Iraq, with sol­diers busy and dis­tract­ed by their jobs and relo­ca­tions.

Few are more famil­iar with the sit­u­a­tion than Hol­ly Petraeus, the bureau’s assis­tant direc­tor of ser­vice mem­ber affairs and wife of retired Army Gen. David H. Petraeus, CIA direc­tor and for­mer com­man­der of U.S. forces in Iraq and Afghanistan.

“As some­one who has lived in mil­i­tary com­mu­ni­ties my entire life, I’ve seen first­hand” how some com­pa­nies prey on mil­i­tary mem­bers, Petraeus said. “I con­tin­ue to hear sto­ries of ser­vice mem­bers being ripped off by busi­ness­es who see them as easy tar­gets to a quick prof­it,” she said, adding that some com­pare the preda­to­ry nature of sales peo­ple who set up out­side mil­i­tary bases to bears at a trout stream.

Ser­vice mem­bers are a favorite prey, she said, because “they have a guar­an­teed pay­check, and they’re not going to quit or get laid off.” And, she added, a mil­i­tary base some­times is the largest employ­er in the area.

Too often, Petraeus said, when a busi­ness is shut down at a base in one state, it sim­ply moves to anoth­er – some­thing the nation­al data­base is designed to pre­vent.

Among the lat­est scams, Petraeus said, is one in which peo­ple claim they can help elder­ly vet­er­ans with their appli­ca­tions to receive the Vet­er­ans Affairs Aid and Atten­dance ben­e­fit, which can pay as much as $2,000 per month. In solic­it­ing their ser­vices, the scam­mers gain access to the vet­er­ans’ finan­cial records, she said.

The FTC received more than 17,000 com­plaints of mil­i­tary-tar­get­ed finan­cial scams last year, FTC Com­mis­sion­er Julie Brill said, pre­cip­i­tat­ing months of meet­ings at mil­i­tary instal­la­tions around the coun­try to hear com­plaints and col­lab­o­rate with the ser­vices on finan­cial train­ing.

Ser­vice mem­bers are a par­tic­u­lar­ly vul­ner­a­ble group of con­sumers, Brill said, due to their young age, inde­pen­dence and lack of finan­cial expe­ri­ence.

The data­base “is about being effec­tive, effi­cient and respon­sive” in pros­e­cut­ing scam artists, she said.

Petraeus urged ser­vice mem­bers to pro­tect them­selves by under­stand­ing what the total price of a prod­uct with inter­est — not just the month­ly pay­ment — will be before buy­ing, and to con­sult finan­cial and legal guid­ance on base.

“They have great legal ser­vices avail­able to them,” she added.

U.S. Depart­ment of Defense
Office of the Assis­tant Sec­re­tary of Defense (Pub­lic Affairs)