Military Personnel: DOD's Tools for Curbing the Use and Effects of Predatory Lending Not Fully Utilized

GAO-05-349 Published: Apr 26, 2005. Publicly Released: May 26, 2005.
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Highlights

The Department of Defense (DOD) has expressed concerns about servicemembers' use of predatory consumer loans as well as their overall financial conditions. "Predatory lending" has no precise definition but describes cases where a lender takes unfair advantage of a borrower, sometimes through deception, fraud, or terms such as very high interest or fees. Serious financial problems can adversely affect unit morale and readiness as well as servicemembers' credit history and military career. DOD has tools such as off-limits lists to help curb the use and effects of predatory loans. GAO answered two questions: (1) To what extent do active duty servicemembers use consumer loans considered to be predatory in nature? and (2) Are DOD and active duty servicemembers fully utilizing the tools that DOD has to curb the use and effects of predatory lending practices?

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense To improve DOD's ability to curb the use and effects of predatory lending practices, the Secretary of Defense should direct the Under Secretary of Defense for Personnel and Readiness to amend existing regulations to require installation commanders to convene the Armed Forces Disciplinary Control Boards at least semiannually to investigate and make recommendations to commanders on matters related to eliminating conditions which adversely affect the health, safety, morals, welfare, morale, and discipline of the Armed Forces, to include servicemembers' use of lenders who may use predatory lending practices.
Closed – Implemented
Follow-up by DOD IG indicates that "Joint AR 190-24, 'Armed Forces Disciplinary Control Boards and Off-Installation Liaison and Operations,' has been amended to require installation commanders to convene their AFDCBs on a quarterly basis. The regulation change has been published in the CFF." We have verified that the new joint regulations have been promulgated.
Department of Defense To ensure DOD provides servicemembers a clear message about whether it endorses advertisers in official installation newspapers that may use predatory lending practices, the Secretary of Defense should direct the Assistant Secretary of Defense for Public Affairs to clarify the regulations pertaining to advertisements in installation publications by requiring disclaimers to be more prominent and taking steps to ensure advertisements reflect stated DOD policies regarding what it considers to be predatory lending.
Closed – Not Implemented
9/2007: Contacted the point of contact to request information about our recommendation. The point of contact in the Office of the Under Secretary of Defense for Personnel and Readiness is contacting DOD public affairs to determine what they have done to implement our recommendation. 9/2009: Contacted the DODIG to request information on the status of the recommendation. DODIG stated that OUSD(P&R) had taken no action on the recommendation for the past 5 years and she has had difficulty obtaining information--suggest closing.

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