Senate BHUA Veterans Benefits Hearing November 2, 2023
Senate Committee on Banking, Housing, and Urban Affairs
Ensuring Financial Protection for Servicemembers, Veterans, and Their Families
Thursday, November 2, 2023
Topline
- Democrats emphasized the importance of the Consumer Financial Protection Bureau (CFPB) in protecting military families, servicemembers, and veterans from predatory lenders and scams and ensuring they have access to credit.
- Republicans called for increased financial literacy education for servicemembers to ensure they understand the financial benefits are available to them, as well as addressing barriers to accessing these benefits from the very federal agencies responsible for administering them.
Witnesses
- Cory Titus, Director of Servicemember Compensation and Veteran Benefits, Military Officers Association of America
- Andia Dinesen, Executive Vice President, Association of Military Banks of America
- Kelly Hruska, Government Relations Director, National Military Family Association
Opening Statements
Chairman Sherrod Brown (D-Ohio)
Chairman Brown discussed how predatory lenders are targeting young service members with payday loans and title loans with up to 100% APRs and that up to 80% of security clearance revocations for veterans are related to financial services. He explained the CFPB’s Office of Servicemember Affairs (OSA) plays an indispensable role in protecting the unique financial services challenges and needs faced by active-duty and reservist service members, military families and spouses, and veterans. Brown added that the OSA is unique among federal agencies regarding its efficiency and high level of responsiveness to military community member complaints, having returned $200 million to veterans from enforcement actions. He said military community members lack the resources for high-power lobbyists and corporate attorneys, and that caring about veterans precludes attacking the CFPB.
Brown said he is committed to policies that protect the interests of the military community. He discussed pending legislation that would support the unique needs of financial services needs of active-duty service members, military families, and veterans, such as the Fair Debt Collection Practices for Servicemembers Act (S.2226)[1] and Veterans Affairs (VA) Loan Awareness Act (S.3068).[2]. He expressed interest in pursuing policies that would prevent medical debt from being reported by credit reporting agencies. Brown also discussed existing, underperforming policies such as the Military Credit Monitoring Rule implemented under a 2018 amendment to the Fair Credit Reporting Act entitling active duty service members to free credit monitoring services from national credit reporting agencies; credit protections under the Service Member Civil Relief Act (SCRA) resulting in over $100 million in excess interest rate charges in the past decade.
Sen. Mike Rounds (R-S.D.)
Sen. Rounds called for a holistic approach to the financial services challenges and circumstances confronting the military community. He said financial safeguards provide more utility than blunt government mandates and general prohibitions alone, noting that regulation will never eliminate all bad actors. He expressed concern regarding the impact that one-size-fits-all policies will have on access and affordability of credit. Rounds said the most important policies will equip young service members and families with financial literacy, noting that 40% of the total Department of Defense (DOD) force is aged twenty-five years or younger and receives many benefits making them easy targets. He questioned the effectiveness of existing financial literacy programs enacted by Congress, expressing hope to improve those programs, and develop tailored legislation.
Rounds discussed Native American veterans as military community members with the highest record of service per capita and their unique challenges. For instance, the VA Native American Direct Loan (NADL) Program provides mortgages for home purchases on trust land, yet intended beneficiaries cannot obtain benefits, sometimes for years. He discussed legislation that he introduced oriented at improving access to this program, the Native American Direct Loan Improvement Act of 2023 (S.185).
Testimony
Cory Titus, Director of Servicemember Compensation and Veteran Benefits, Military Officers Association of America
In his testimony, Titus noted that before passing the Military Lending Act (MLA) of 2006, during the early 2000s, young service members were three times more likely to enter into predatory loans to cover everyday expenses. He said the CFPB enforces the MLA and through the OSA, provides education to military community members and refers their complaints for enforcement, which has resulted in more than 320 thousand complaints and $175 million in fines. Titus described a student loan servicer that falsely reported defaults by veterans and a mortgage lender targeting veterans with marketing materials featuring fake VA and Federal Housing Administration (FHA) logos as offenders. He stated that his agency supports the CFPB, along with 20 other Military Service Organizations and Veterans Service Officers.
Andia Dinesen, Executive Vice President, Association of Military Banks of America
In her testimony, Dinesen described unbanked military community members’ financial services issues that arise from receiving payments through paper checks and prepaid debit cards, such as theft of funds, stolen checks, and debit card and check cashing fees. She described the Veterans Benefits Banking Program, a public-private partnership with the VA, helping to connect veterans with low-cost bank and credit union accounts and increase direct deposit utilization. Her organization will launch “VetCents” on Veterans Day, which is a financial literacy platform for veterans. She noted that her organization’s program demonstrates that the government can work with the private sector to protect veterans if the infrastructure is in place.
Kelly Hruska, Government Relations Director, National Military Family Association
In her testimony, Hruska identified unique financial issues facing military community members such as increasing out-of-pocket costs associated with military moves, high levels of military spouse unemployment, rising housing costs, high childcare fees, and distance from family support systems. She explained that before the MLA and creation of the CFPB, predatory non-bank lenders like quick cash shops, title lenders, and pawn shops clustered around military installations where 200 to 300% interest rates were common and up to 700% in states lacking usury caps. She emphasized that the CFPB is vital to protecting the military community’s interests through its role in oversight and specialized task force for this community. Hruska discussed the No Surprises Act and the CFPB’s pending rulemaking process related to removing all medical debt from credit reports, noting that it will have tremendous benefits for veterans and their families, noting that veterans struggle with high medical costs. She concluded by remarking on the need to ensure service members focus on their missions, which is accomplished by enforcing the MLA and SCRA and supporting the CFPB.
Question & Answer
Role of the CFPB
Sen. Jack Reed (D-R.I.) said the CFPB is the only federal agency designed to protect service members as consumers. He asked how the abolishment of the CFPB would impact military families. Titus said that the idea of the CFPB disappearing is frightening to him and his members. Reed asked what role the CFPB has related to emerging financial services products. Hruska said that while new products undergo an introductory period, the CFPB monitors the market and identifies problems early and works with companies to address issues.
Brown asked what it would mean to military families if the CFPB was eliminated. Titus said that it would result in a rise in scams targeting military members and their families.
Sens. Bob Menendez (D-N.J.) asked which agency service members would turn to for assistance if there was no CFPB. Hruska said that they could reach out to the DOD and other veterans’ organizations for assistance, while Titus warned that there is no other agency with enforcement powers to go after scammers.
Cash Apps
Reed asked why complaints related to instant payment apps like Zelle are higher for military service members. Titus said instant payment apps are very useful products to service members given their transient work, and that companies issuing new products must understand the unique needs of military members to improve their products. Titus explained that the lack of infrastructure for resolving disputes from instant fund transfer programs, the inability to reach live customer service agents, and the long turnaround time results in harm to servicemembers. He also identified theft issues are high among service members, which makes clear safety and security disclosures for these apps a priority.
VA Mortgages & Refinancing
Sen. J.D. Vance (R-Ohio) asked the witnesses about predatory mortgage refinancing scams that target VA mortgage loan borrowers. He said he believes refinancing in a high-interest rate environment where APRs on 30-year fixed rate mortgages went from 3% to the current 7% would be a bad decision for veterans, and asked what types of solicitations veterans currently receive. Titus said predatory mortgage refinancing schemes are a persistent problem following APR rate changes, and tactics range from yard signs like those surrounding residences close to the Pentagon, to mailings and online ads. Vance asked for the demographics of those most targeted members. Titus said he was unaware of any, but that these schemes would most likely harm veterans experiencing financial stress.
Vance asked whether the lack of protections for VA mortgages from predatory schemes could be resolved by adding additional mortgage products to the menu. Hruska said ensuring that veterans have access to the same credit products through the VA as are available to civilians would help.
Military Related Interest Rate Caps
Brown described the lawbreaking failures to abide by SCRA interest rate protections for service members, which has cost military community members up to $2 million. He asked whether most financial service providers automatically apply SCRA interest rates for service members. Titus said no, which is a significant problem for military community members because when a service member is called to duty, their priorities are preparing for their mission and though the interest rate protections are important, the paperwork is not their priority. Brown said he was aware of at least two credit card issuers proactively monitoring accounts for SCRA interest rate compliance and wants to ensure all creditors engage in monitoring.
Sen. Chris Van Hollen (D-Md.) discussed extending MLA protections to veterans and Gold Star families that would ensure the 36% interest rate cap applies to them. He discussed Maryland’s 25% cap and thwarting a Trump Administration proposal that would have allowed “rent-a-banks” to side-step state usury laws. Van Hollen asked about related protections. Hruska said Gold Star families have targets painted on their backs given the benefits they receive, and it’s important to protect those families when they are most vulnerable.
Credit Reports
Security Clearances & Post-Service Employment Eligibility
Brown asked if active-duty military members have been receiving free credit reports, which they are entitled to under the Military Credit Monitoring Rule. Titus said not always. Brown asked if it would benefit military families if creditors had to verify all military credit accounts. Titus said yes, noting that military members who are facing deployments don’t have time to dispute items on their credit file.
Van Hollen asked about veterans being denied their security clearances because of their credit scores. Titus noted that MLA was incredibly successful at protecting veterans and their families from debt traps, especially when deployed.
Medical Debt & Access to Credit
Sen. Elizabeth Warren (D-Mass.) remarked 1-in-3 adults struggle with medical bills, which prevent them from obtaining credit products from lenders and banks. She said that the CFPB received over 5 thousand complaints from military service members over the past three years related to medical bills that they did not owe. She asked why this is happening given the quality of coverage from TRICARE health insurance. Hruska said these bills typically arise from emergency care and specialized treatment where TRICARE is slow to reimburse the healthcare provider, and in many cases, TRICARE only pays the medical bills after the healthcare provider refers the debt to collections.
Warren also discussed a high volume of CFPB complaints from military members in South Carolina, Tennessee, Florida, and Alabama related to surprise unpaid balances and bills mailed to the wrong addresses. She said the CFPB asked the DOD to collect data explaining the high volume of issues related to medical debt, and when she followed up with the DOD on the CFPB’s request the DOD noted it had done nothing. Warren indicated that using medical debt in the credit underwriting process results in unreliable creditworthiness determinations and harms civilians and military service members. She asked if removing medical debt from credit reports helps military families. Hruska answered yes and that the DOD and CFPB should collect data.
Predatory Lending & Scams
Van Hollen asked if financial literacy education is adequate to counter predatory lending. Hruska said not on its own and explained that veterans need the CFPB to enforce the MLA to ensure they are protected.
Sen. Jon Tester (D-Mont.), Chairman of the Senate Veterans Affairs Committee for whom Brown deferred his questioning, asked which agency does the best job at protecting military community members from financial exploitation, the Federal Trade Commission (FTC) or CFPB. Titus, Dinesen, and Hruska allsaid this involves collaboration among the VA and other government agencies. Dinesen added that this effort should involve private-sector relationships.
Tester said that he met with Veterans Service Officers (VSOs) prior to the hearing who advised him that the frequent financial exploitation of veterans is a high priority for Congress to address, and asked what should be done. Titus suggested the Governing Unaccredited Representatives Defrauding (GUARD) VA Benefits Act of 2023 (S.740).[3]
DOD & VA Benefits Administration
Rounds stressed that the public assumes the DOD has a process in place to provide adequate remuneration and housing and that once a service member leaves the military, the VA protects them. However, access to benefits by military community members remains a problem. He asked who is responsible for ensuring DOD and VA benefits go to the intended beneficiaries. Titus said the agencies themselves. Titus, Dinesen, and Hruska all said they frequently must educate veterans on how to claim these benefits and connect them with VSOs.
Rounds said 70 veterans in his state have had to obtain benefits from private entities because the DOD and VA fail to issue benefits they’re entitled to. He said it’s easy to claim private enterprises are exploiting veterans. He concluded by saying that Congress must eliminate the bureaucratic red tape at the federal level to ensure military community members get their benefits.
Senate Committee on Banking, Housing, and Urban Affairs
Ensuring Financial Protection for Servicemembers, Veterans, and Their Families
Thursday, November 2, 2023
Topline
- Democrats emphasized the importance of the Consumer Financial Protection Bureau (CFPB) in protecting military families, servicemembers, and veterans from predatory lenders and scams and ensuring they have access to credit.
- Republicans called for increased financial literacy education for servicemembers to ensure they understand the financial benefits are available to them, as well as addressing barriers to accessing these benefits from the very federal agencies responsible for administering them.
Witnesses
- Cory Titus, Director of Servicemember Compensation and Veteran Benefits, Military Officers Association of America
- Andia Dinesen, Executive Vice President, Association of Military Banks of America
- Kelly Hruska, Government Relations Director, National Military Family Association
Opening Statements
Chairman Sherrod Brown (D-Ohio)
Chairman Brown discussed how predatory lenders are targeting young service members with payday loans and title loans with up to 100% APRs and that up to 80% of security clearance revocations for veterans are related to financial services. He explained the CFPB’s Office of Servicemember Affairs (OSA) plays an indispensable role in protecting the unique financial services challenges and needs faced by active-duty and reservist service members, military families and spouses, and veterans. Brown added that the OSA is unique among federal agencies regarding its efficiency and high level of responsiveness to military community member complaints, having returned $200 million to veterans from enforcement actions. He said military community members lack the resources for high-power lobbyists and corporate attorneys, and that caring about veterans precludes attacking the CFPB.
Brown said he is committed to policies that protect the interests of the military community. He discussed pending legislation that would support the unique needs of financial services needs of active-duty service members, military families, and veterans, such as the Fair Debt Collection Practices for Servicemembers Act (S.2226)[1] and Veterans Affairs (VA) Loan Awareness Act (S.3068).[2]. He expressed interest in pursuing policies that would prevent medical debt from being reported by credit reporting agencies. Brown also discussed existing, underperforming policies such as the Military Credit Monitoring Rule implemented under a 2018 amendment to the Fair Credit Reporting Act entitling active duty service members to free credit monitoring services from national credit reporting agencies; credit protections under the Service Member Civil Relief Act (SCRA) resulting in over $100 million in excess interest rate charges in the past decade.
Sen. Mike Rounds (R-S.D.)
Sen. Rounds called for a holistic approach to the financial services challenges and circumstances confronting the military community. He said financial safeguards provide more utility than blunt government mandates and general prohibitions alone, noting that regulation will never eliminate all bad actors. He expressed concern regarding the impact that one-size-fits-all policies will have on access and affordability of credit. Rounds said the most important policies will equip young service members and families with financial literacy, noting that 40% of the total Department of Defense (DOD) force is aged twenty-five years or younger and receives many benefits making them easy targets. He questioned the effectiveness of existing financial literacy programs enacted by Congress, expressing hope to improve those programs, and develop tailored legislation.
Rounds discussed Native American veterans as military community members with the highest record of service per capita and their unique challenges. For instance, the VA Native American Direct Loan (NADL) Program provides mortgages for home purchases on trust land, yet intended beneficiaries cannot obtain benefits, sometimes for years. He discussed legislation that he introduced oriented at improving access to this program, the Native American Direct Loan Improvement Act of 2023 (S.185).
Testimony
Cory Titus, Director of Servicemember Compensation and Veteran Benefits, Military Officers Association of America
In his testimony, Titus noted that before passing the Military Lending Act (MLA) of 2006, during the early 2000s, young service members were three times more likely to enter into predatory loans to cover everyday expenses. He said the CFPB enforces the MLA and through the OSA, provides education to military community members and refers their complaints for enforcement, which has resulted in more than 320 thousand complaints and $175 million in fines. Titus described a student loan servicer that falsely reported defaults by veterans and a mortgage lender targeting veterans with marketing materials featuring fake VA and Federal Housing Administration (FHA) logos as offenders. He stated that his agency supports the CFPB, along with 20 other Military Service Organizations and Veterans Service Officers.
Andia Dinesen, Executive Vice President, Association of Military Banks of America
In her testimony, Dinesen described unbanked military community members’ financial services issues that arise from receiving payments through paper checks and prepaid debit cards, such as theft of funds, stolen checks, and debit card and check cashing fees. She described the Veterans Benefits Banking Program, a public-private partnership with the VA, helping to connect veterans with low-cost bank and credit union accounts and increase direct deposit utilization. Her organization will launch “VetCents” on Veterans Day, which is a financial literacy platform for veterans. She noted that her organization’s program demonstrates that the government can work with the private sector to protect veterans if the infrastructure is in place.
Kelly Hruska, Government Relations Director, National Military Family Association
In her testimony, Hruska identified unique financial issues facing military community members such as increasing out-of-pocket costs associated with military moves, high levels of military spouse unemployment, rising housing costs, high childcare fees, and distance from family support systems. She explained that before the MLA and creation of the CFPB, predatory non-bank lenders like quick cash shops, title lenders, and pawn shops clustered around military installations where 200 to 300% interest rates were common and up to 700% in states lacking usury caps. She emphasized that the CFPB is vital to protecting the military community’s interests through its role in oversight and specialized task force for this community. Hruska discussed the No Surprises Act and the CFPB’s pending rulemaking process related to removing all medical debt from credit reports, noting that it will have tremendous benefits for veterans and their families, noting that veterans struggle with high medical costs. She concluded by remarking on the need to ensure service members focus on their missions, which is accomplished by enforcing the MLA and SCRA and supporting the CFPB.
Question & Answer
Role of the CFPB
Sen. Jack Reed (D-R.I.) said the CFPB is the only federal agency designed to protect service members as consumers. He asked how the abolishment of the CFPB would impact military families. Titus said that the idea of the CFPB disappearing is frightening to him and his members. Reed asked what role the CFPB has related to emerging financial services products. Hruska said that while new products undergo an introductory period, the CFPB monitors the market and identifies problems early and works with companies to address issues.
Brown asked what it would mean to military families if the CFPB was eliminated. Titus said that it would result in a rise in scams targeting military members and their families.
Sens. Bob Menendez (D-N.J.) asked which agency service members would turn to for assistance if there was no CFPB. Hruska said that they could reach out to the DOD and other veterans’ organizations for assistance, while Titus warned that there is no other agency with enforcement powers to go after scammers.
Cash Apps
Reed asked why complaints related to instant payment apps like Zelle are higher for military service members. Titus said instant payment apps are very useful products to service members given their transient work, and that companies issuing new products must understand the unique needs of military members to improve their products. Titus explained that the lack of infrastructure for resolving disputes from instant fund transfer programs, the inability to reach live customer service agents, and the long turnaround time results in harm to servicemembers. He also identified theft issues are high among service members, which makes clear safety and security disclosures for these apps a priority.
VA Mortgages & Refinancing
Sen. J.D. Vance (R-Ohio) asked the witnesses about predatory mortgage refinancing scams that target VA mortgage loan borrowers. He said he believes refinancing in a high-interest rate environment where APRs on 30-year fixed rate mortgages went from 3% to the current 7% would be a bad decision for veterans, and asked what types of solicitations veterans currently receive. Titus said predatory mortgage refinancing schemes are a persistent problem following APR rate changes, and tactics range from yard signs like those surrounding residences close to the Pentagon, to mailings and online ads. Vance asked for the demographics of those most targeted members. Titus said he was unaware of any, but that these schemes would most likely harm veterans experiencing financial stress.
Vance asked whether the lack of protections for VA mortgages from predatory schemes could be resolved by adding additional mortgage products to the menu. Hruska said ensuring that veterans have access to the same credit products through the VA as are available to civilians would help.
Military Related Interest Rate Caps
Brown described the lawbreaking failures to abide by SCRA interest rate protections for service members, which has cost military community members up to $2 million. He asked whether most financial service providers automatically apply SCRA interest rates for service members. Titus said no, which is a significant problem for military community members because when a service member is called to duty, their priorities are preparing for their mission and though the interest rate protections are important, the paperwork is not their priority. Brown said he was aware of at least two credit card issuers proactively monitoring accounts for SCRA interest rate compliance and wants to ensure all creditors engage in monitoring.
Sen. Chris Van Hollen (D-Md.) discussed extending MLA protections to veterans and Gold Star families that would ensure the 36% interest rate cap applies to them. He discussed Maryland’s 25% cap and thwarting a Trump Administration proposal that would have allowed “rent-a-banks” to side-step state usury laws. Van Hollen asked about related protections. Hruska said Gold Star families have targets painted on their backs given the benefits they receive, and it’s important to protect those families when they are most vulnerable.
Credit Reports
Security Clearances & Post-Service Employment Eligibility
Brown asked if active-duty military members have been receiving free credit reports, which they are entitled to under the Military Credit Monitoring Rule. Titus said not always. Brown asked if it would benefit military families if creditors had to verify all military credit accounts. Titus said yes, noting that military members who are facing deployments don’t have time to dispute items on their credit file.
Van Hollen asked about veterans being denied their security clearances because of their credit scores. Titus noted that MLA was incredibly successful at protecting veterans and their families from debt traps, especially when deployed.
Medical Debt & Access to Credit
Sen. Elizabeth Warren (D-Mass.) remarked 1-in-3 adults struggle with medical bills, which prevent them from obtaining credit products from lenders and banks. She said that the CFPB received over 5 thousand complaints from military service members over the past three years related to medical bills that they did not owe. She asked why this is happening given the quality of coverage from TRICARE health insurance. Hruska said these bills typically arise from emergency care and specialized treatment where TRICARE is slow to reimburse the healthcare provider, and in many cases, TRICARE only pays the medical bills after the healthcare provider refers the debt to collections.
Warren also discussed a high volume of CFPB complaints from military members in South Carolina, Tennessee, Florida, and Alabama related to surprise unpaid balances and bills mailed to the wrong addresses. She said the CFPB asked the DOD to collect data explaining the high volume of issues related to medical debt, and when she followed up with the DOD on the CFPB’s request the DOD noted it had done nothing. Warren indicated that using medical debt in the credit underwriting process results in unreliable creditworthiness determinations and harms civilians and military service members. She asked if removing medical debt from credit reports helps military families. Hruska answered yes and that the DOD and CFPB should collect data.
Predatory Lending & Scams
Van Hollen asked if financial literacy education is adequate to counter predatory lending. Hruska said not on its own and explained that veterans need the CFPB to enforce the MLA to ensure they are protected.
Sen. Jon Tester (D-Mont.), Chairman of the Senate Veterans Affairs Committee for whom Brown deferred his questioning, asked which agency does the best job at protecting military community members from financial exploitation, the Federal Trade Commission (FTC) or CFPB. Titus, Dinesen, and Hruska allsaid this involves collaboration among the VA and other government agencies. Dinesen added that this effort should involve private-sector relationships.
Tester said that he met with Veterans Service Officers (VSOs) prior to the hearing who advised him that the frequent financial exploitation of veterans is a high priority for Congress to address, and asked what should be done. Titus suggested the Governing Unaccredited Representatives Defrauding (GUARD) VA Benefits Act of 2023 (S.740).[3]
DOD & VA Benefits Administration
Rounds stressed that the public assumes the DOD has a process in place to provide adequate remuneration and housing and that once a service member leaves the military, the VA protects them. However, access to benefits by military community members remains a problem. He asked who is responsible for ensuring DOD and VA benefits go to the intended beneficiaries. Titus said the agencies themselves. Titus, Dinesen, and Hruska all said they frequently must educate veterans on how to claim these benefits and connect them with VSOs.
Rounds said 70 veterans in his state have had to obtain benefits from private entities because the DOD and VA fail to issue benefits they’re entitled to. He said it’s easy to claim private enterprises are exploiting veterans. He concluded by saying that Congress must eliminate the bureaucratic red tape at the federal level to ensure military community members get their benefits.
Tester said that he met with Veterans Service Officers (VSOs) prior to the hearing who advised him that the frequent financial exploitation of veterans is a high priority for Congress to address, and asked what should be done. Titus suggested the Governing Unaccredited Representatives Defrauding (GUARD) VA Benefits Act of 2023 (S.740).[3]
Financial Literacy Programs
Sens. Katie Britt (R-A.L.), Brown, Rounds, Vance, and Van Hollen all supported military community member financial literacy programs. Britt asked which financial literacy tools could support the military community. Dinesen said improved access to education tools and resources at military banks and credit unions, utilizing the financial counselor within the military installation’s family readiness office, Military OneSource, and VA-private sector partnerships.
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[1] Sections 11001, 11002, and 11003 of the Senate-passed Fiscal Year (FY) 2024 National Defense Authorization Act (NDAA) (S.2226).
[2] “To require each enterprise to include on the Uniform Residential Loan Application a disclaimer to increase awareness of the direct and guaranteed home loan programs of the Department of Veterans Affairs, and for other purposes.” Veterans Affairs (VA) Loan Awareness Act, S.3068.