Military Families Find Signs of Progress in the Fight Against Financial Exploitation (The Motley Fool)

By Chris Birk, Special to The Motley Fool Chris Birk, Special To The Motley Fool – Mon May 30, 8:39 pm ET

Military members and their families sacrifice a great deal to keep America safe.

The strain of service can take a devastating toll on finances. Fiscal predators prey on this demographic, and military members are more likely to be financially overleveraged than their civilian counterparts.

A renewed commitment to protecting military families from financial exploitation has been a long time coming. The newest front in this battle has the potential to turn the tide and boost education and resources for service members nationwide.

Federal and military officials recently unveiled the Office of Servicemember Affairs, a new consumer protection agency focused solely on service members and their families. The OSA is part of the Consumer Financial Protection Bureau, an independent watchdog organization created last year by Congress.

The OSA is working with the Department of Defense to ensure that military members and their families receive consistent and clear financial education and to monitor complains and questions. It's also fostering communication among federal and state agencies to improve consumer protections for military families.

The agency is headed by Holly Petraeus, wife of Gen. David Petraeus, the current commander of U.S. forces in Afghanistan.

"We understand that military life can have some extra challenges, such as deployment and frequent moves, and that those challenges can sometimes have powerful financial repercussions," Holly Petraeus wrote in a welcome letter to military families. "Our men and women in uniform should be able to do their jobs without having to worry about falling victim to unfair or deceptive financial practices."

Being financially overwhelmed can make service members and their spouses more vulnerable to unscrupulous companies seeking to take advantage of them.

A recent survey from the FINRA Investor Education Foundation featured some sobering findings:

Nearly one in three enlisted personnel or junior NCOs had used payday loans, auto-title loans, or other risky borrowing practices in the previous five years.About 15% of those surveyed had both a mortgage and a credit card balance of at least $10,000.More than half made only the minimum payment on credit cards, and almost a third of respondents reported a late payment in the past year.More than a third had difficulties covering monthly expenses and billsOnly half were saving for predictable life events such as retirement or a child's college education.

These issues are more than just financial problems. Fiscal concerns on the home front can negatively affect service members in the field and even jeopardize mission readiness.

Finances are consistently ranked as one of the top three stressors for service members, ahead of things such as deployments, family, and even war. Nearly three-quarters of Naval security clearance revocations and denials in 2007 were tied directly to fiscal management issues, according to the CFPB.

"Soldiers who are distracted by financial issues at home are not fully focused on fighting the enemy," Army Secretary John McHugh's wrote last spring.

Holly Petraeus and her colleagues continue to meet with military families, using their input to help shape OSA initiatives. Educating service members and teaching them how to make sound financial decisions is a cornerstone of the agency's mission.

It's also an ethos that professionals in the financial world and civilians across the country should take to heart -- not just on Memorial Day, but every day of the year. Military members and their families have dedicated their lives to serving our country.

We can serve them with openness, education, and a commitment to rooting out those who would dishonor their sacrifice for the sake of an easy dollar.

Guest contributor Chris Birk is director of content and communications for Veterans United Home Loans, the nation's leading dedicated VA lender. The Missouri-based company has worked with more than 500,000 military families since its 2003 inception and serviced more than $1 billion in VA loans in the last year alone.

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Portugal's over-indebted families struggle (AFP)

LISBON (AFP) – Unemployed, Ana can no longer pay her mortgage and fears losing her home. With no chance of getting a bailout like the state, many Portuguese are turning to consumer advocacy groups like Deco to try to keep from losing everything.

"Banks have more respect for Deco than for clients in difficulty," explained Ana, who stopped paying her 289-euro ($404) monthly mortgage payments in September, after losing her job due to depression.

Living in a Lisbon suburb, this 36-year-old has had to stretch her metalworker husband's salary of 600 euros a month to make ends meet.

"For food, I only spend 80 euros as we receive charity donations," she said, her eyes hiding behind small round spectacles.

Sitting at a Deco office, she explained that she is 2,300 euros behind in her payments. It's decided that the watchdog will negotiate a grace period during which Ana will have to only pay interest on her debt.

"My greatest fear is losing my apartment, but I have no other choice," she said. "Either I repay the bank, or pay my water and electricity bills."

Portuguese have faced mounting financial difficulties as the government imposed austerity measures over the past year to try to keep on top of the country's debts.

The country's economy shrank by 0.7 percent last year and unemployment rose 12.4 percent.

However, the government was forced last month to request a 78 billion euro bailout from the EU and IMF to avoid a default.

It will now have to hike taxes further and make deeper spending cuts that are expected to cause a 2.0 percent contraction this year.

Antonia and Rosalia, a couple in their 50s, owe between 50,000 and 60,000 euros spread across half a dozen loans. Having defaulted on half of them, Antonio, a waiter, has had 30 percent of his 900-euro salary seized as forced repayment.

"We were tricked by bank advertising and when we realised the interest rates involved, it was already too late," he said.

When debts are very high, Deco recommends families go to court and declare bankruptcy, which is becoming more and more frequent.

In 2010, Portuguese families sent Deco 17,000 requests for help, twice the level of 2008. In the first three months of this year, the number of case files is up by 22 percent from the same period last year.

"On average we treat couples aged between 35 and 45 years old, with a child at home, who have taken out more than five loans and face a fall in revenue, usually provoked by job loss," said Natalia Nunes, a Deco manager.

"Lately, we have also received civil servants whose salaries have dropped due to austerity measures."

In addition to the worsening economic situation explaining this explosion in cases, Nunes also points to families, "who just like the state, for too long spent more than they had, encouraged by easy credit offered by banks."

In March, according to the Bank of Portugal, 14.2 percent of the 4.6 million families with bank loans had defaulted. Average household debt levels in 2009 stretched to 130 percent of disposable income, against 96 percent in the eurozone overall.

The situation doesn't look promising with the new austerity measures as part of Portugal's bailout.

"With these measures and price increases," Nunes warned, "problems will only get worse and the number of over-indebted families will increase."

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