Soldier Debt

One of the most common cases I see as a legal assistance attorney in the Army is a soldier in debt. More often than not, the soldier has purchased a car he can't afford, at a price the car is not worth, and at an interest rate at or near 25%. At some point, perhaps when the car breaks down on the side of the road, the soldier realizes what an awful deal he has signed. Now, when it is usually too late to do anything about it, the soldier might come to see me.

Unfortunately, many soldiers are either too obstinate or too ashamed even to admit they've gotten a raw deal, and they do not come to see me, or any of the other resources they have for legal or financial advice. Instead, they go back to the same (or another) shady dealer, and make the problem worse in one of two ways. If the dealer can arrange it, the soldier may be convinced to roll over the unpaid debt on the first car into a new loan for a second car, putting themselves outrageously upside down on a second car that will likely break down on the side of the road.

More often, however, the dealer will convince the soldier to allow a "voluntary repossesion," which is legally no different from involuntary repossesion except that the dealer does not have to pay a repo man to go get the car. The soldier brings the car back, stops making payments, and blissfully thinks that the nightmare is over.

Until, that is, several weeks or months later when the repossesion shows up on their credit, the lender sends notice of intent to sell the repossesed car, and the soldier receives a notice of their obligation to pay the deficiency (the difference between the amount owed on the loan and the price the repossesed car was sold for at auction). When the soldier refuses to pay this deficiency, the lender sues the soldier, who ignores the summons and thus loses via default judgment, and the lender sends a copy of the judgment to DFAS to begin garnishing the soldier's pay.

At any rate, this is a longwinded way to say that I am not at all surprised to see that the rising debt of soldiers has become an operational security risk:

Thousands of U.S. troops are being barred from overseas duty because they are so deep in debt they are considered security risks, according to an Associated Press review of military records.

The number of troops held back has climbed dramatically in the past few years. And while they appear to represent a very small percentage of all U.S. military personnel, the increase is occurring at a time when the armed forces are stretched thin by the wars in Iraq and Afghanistan.

"We are seeing an alarming trend in degrading financial health," said Navy Capt. Mark D. Patton, commanding officer at San Diego's Naval Base Point Loma.

The Pentagon contends financial problems can distract personnel from their duties or make them vulnerable to bribery and treason. As a result, those who fall heavily into debt can be stripped of the security clearances they need to go overseas.

Hopefully, recognition of this problem will lead to more proactive measures to keep soldiers away from predatory lending and other unethical business practices that target soldiers. Unfortunately, the fact remains that many of these soldiers are young, financially naive, have money in their pocket for the first time, and live in an environment of competitive consumerism. That's a cultural issue that no law is going to change.

UPDATE: One of my more cynical colleagues had this response to the story:

Yes, it's clear that payday lenders are the enemy in the war on terror. Not, of course, a hopelessly outdated and stupid regulation on security clearances written before bankruptcy was cool.

Still, it is sad that so many soldiers might find themselves with a bizarre Scylla or Charybdis choice between bankruptcy or a revoked security clearance.