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Too Many Companies Take Advantage of Service Members and Offer Poor Financial Advice

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On Monday, I had the opportunity to attend the Society for Financial Education and Professional Development (SFEPD) conference in Washington, DC.  I presented the results of our study with Professor Zimbardo (on why people make poor financial decisions) to an audience of inspiring educators. But, earlier in the day, I listened to presentations from Holly Petraeus, head of Service Member Affairs at the CFPB, and Richard Cordray, director of the CFPB.

Two big messages came out of the morning session that I wanted to share with our readers:

  1. There are many financial organizations that target and take advantage of our military. The CFPB is working hard to defend them, but I find it so distressing that this problem exists.
  2. The CFPB recognizes the abundance of poor, paid-for financial advice that is flooding the Internet. And they recognize that it is a problem. We created MagnifyMoney because we think price comparison in financial services is fundamentally broken, and I was happy to hear the Cordray’s comments.

Service members

Holly Petraeus leads the Office of Service Member Affairs at the CFPB. That team has three core responsibilities: help with the financial literacy education in the military, monitor financial complaints of the service members and coordinate efforts across multiple agencies.

At MagnifyMoney, we think the ability to complain to the CFPB is one of the great achievements of the post-crisis regulatory world. When you review the complaints of military personnel, you can quickly become sickened by some of the organizations out there that profit from exploitation of the men and women who protect our freedom.

The CFPB has received over 25,000 complaints from service members. Here are some of the biggest areas:

  • Mortgages: service members often have to move at a moments notice. Holly told us that she had moved 24 times during her husband’s 37-year career with the military. Because of the economic crisis, many military find that their homes are underwater. And the mortgage lenders are not forgiving.
  • Debt collection agencies: severe derogatory marks on a credit report can have big implications for a military career, including loss of security clearance. Collection agencies know this, and will push the boundaries of the law and be quite aggressive in collection tactics, preying on their fear.
  • Payday lenders: these companies literally set up right next to military bases. And they often outright break the law. They will lie about protections that members of the service have under SCRA. They will lie about the true cost of the product. And, the products are obscenely expensive.

In one of the worst stories I heard, a collection agency was harassing the wife of a fallen soldier multiple times per day, in breach of the law and absent any sent of ethics or morals.

It is great to know that the CFPB, and Holly, are standing up for our service members’ rights. If you (or anyone you know) has been a victim of an organization that takes advantage of the military, we want to know about it. Please email me at [email protected]

Online Financial Advice

Richard Cordray gave a great speech. The CFPB has helped $4 billion move from the pockets of the banks to the pockets of individuals. And that is just the beginning of the impact that they are having.

However, I was particularly interested to hear his thoughts on how advice is being given on the Internet. We started MagnifyMoney because when you do a search for “best credit card” – or any other financial product, you end up seeing results from people who purely “lead generation” businesses. They want to make money.

Richard said that explicitly, “If you search Google looking for financial advice, you will see 200 firms trying to sell you something. And that is a problem.”

We couldn’t agree more. That is why we created MagnifyMoney – to provide completely unbiased advice that isn’t influenced by the people paying us commissions.

I am happy to see that this is on the CFPB radar – it can only lead to a better industry over time.

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