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

1. Military Session FDIC Conference: Affordable Alternatives for Responsible Short-Term Credit Marcus Beauregard DoD Financial Readiness Campaign

2. 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 Military Statistics (average roll-over of 4.9 times)

3. 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 Department of Defense Perspective

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

5. 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 Directive 1344.9

6. 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 DoD Social Compact and Financial Readiness Campaign • Increase protection against predatory practices • Target Audience: Spouses and junior enlisted

7. 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 Financial Readiness Campaign andCredit Alternatives • Social marketing campaign • Developing Service-level campaigns

8. 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 Additional Credit Alternatives

9. 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 Alternative Ideas for Financial Institutions