# Presentation: 171283

- Military Session
- FDIC Conference:
***Affordable Alternatives for Responsible Short-Term Credit***

- Marcus Beauregard
- DoD Financial Readiness Campaign

## Military Statistics

- Signs of financial problems (junior enlisted, 3 – 5 years of service):
- 11% bounced checks
- 19% failed to make minimum credit payments
- 5% fell behind paying mortgage or rent
- 21% were pressured to pay bills
- 12% had telephone, cable or internet cut off
- 3% had water, electricity or heat shut off
- 2% had car, appliance or furniture repossessed
- 6% failed to make a car payment
**12% got a payday loan**
- 1% filed for bankruptcy
- Defense Manpower Data Center Survey of Active Duty Service members, March 2005

**(average roll-over of 4.9 times)**

## Department of Defense Perspective

- DoD views personal finance as important to force readiness
- Part of the Social Compact
- Tracked in evaluating the “Status of the Force”
- Payday lending carried as one of ten top issues discussed with states
- Military personnel are potentially vulnerable to payday lenders
- Culture emphasizes self-sufficiency
- Separated from family support/guidance
- May be financially naïve
- Use of returned checks and nonpayment of bills are not options for short term credit
- Article 123a. of the Uniform Code of Military Justice
- DoD Directive 1344.9, Indebtedness of Military Personnel

## ART. 123a.   MAKING, DRAWING, OR UTTERING CHECK, DRAFT, OR ORDER WITHOUT SUFFICIENT FUNDS

**Any person subject to this chapter who--**
- (1) for the procurement of any article or thing of value, with intent to defraud; or
- (2) for the payment of any past due obligation, or for any other purpose, with intent to deceive;
- makes, draws, utters, or delivers any check, draft, or order for the payment of money upon any bank or other depository, **knowing at the time that the maker or drawer has not or will not have sufficient funds in, or credit with, the bank or other depository for the payment of that check, draft, or order in full presentment, shall be punished as a court-martial may direct.** The making, drawing, uttering, or delivering by a maker or drawer of a check, draft, or order, payment of which is refused by the drawee because of insufficient funds of the maker or drawer in the drawee's possession or control, is prima facie evidence of his intent to defraud or deceive and of his knowledge of insufficient funds in, or credit with, that bank or other depository, **unless the maker or drawer pays the holder the amount due within five days after receiving notice**, orally or in writing, that the check, draft, or order was not paid on presentment. In this section the word **"credit" means an arrangement or understanding , express or implied, with the bank or other depository for the payment of that check, draft, or order. **

## DoD Directive 1344.9

- _4. POLICY_
- 4.1. **Members of the Military Services are expected to pay their just financial obligations in a proper and timely manner. A Service member's failure to pay a just financial obligation may result in disciplinary action under the Uniform Code of Military Justice** (reference (e)) or a claim pursuant to Article 139 of reference (e). Except as stated in this subsection, and in subparagraphs 4.1.1. and 4.1.2., below, the DoD Components have no legal authority to require members to pay a private debt or to divert any part of their pay for satisfaction of a private debt.

## DoD Social Compact and Financial Readiness Campaign

- Social Compact Vision for Personal Finance:
- Military Culture values financial literacy and responsibility
- Financial Readiness Campaign
- Objective: Increase personal readiness by reducing the stressors related to financial problems
- Increase awareness and abilities
- Increase savings and reduce dependence on credit

- Increase protection against predatory practices
- Target Audience:  Spouses and junior enlisted

## Financial Readiness Campaign andCredit Alternatives

- Savings and reduced dependence on debt as alternative
- Educate Service members and spouses on effective money management
- DoD Instruction 1342.17, Personal Financial Management Programs for Service Members, requires basic money management competence
- Military Services provide basic courses to support requirement
- Partner organizations are providing                                                supplemental education

- Social marketing campaign
- Developing Service-level campaigns

## Additional Credit Alternatives

- Credit counseling and debt management
- Chronic use of dishonored checks, overdraft protection and payday loans are symptoms
- Spiral of debt eventually ends in counseling/debt management
- Counseling offered through Family Support Centers,                          Military OneSource and partner organizations
- Debt management being offered                                                                                                                       through partner organizations
- Positive products and services
- E-Duction Clear Card
- Short-term loans with                                                                                financial education

##  Alternative Ideas for Financial Institutions

- Products tied to savings and established credit
- Products with automatic allotments to savings
- Savings incentives
- Savings overdraft protection
- Line of credit overdraft protection
- Installment loans tied to direct deposits and education
- “Just-in-time” education and assistance
- Additional educational assistance for newly banked
- On-line budgeting and recordkeeping tools tied to checking accounts
- Opportunities for education/counseling when overdrafts and delinquencies occur
- 	Bottom line:  Help break the cycle of debt and help clients work within their financial means