Military Families
Avoiding Scams That Target the Military
Protect yourself from inappropriate sales practices and outright scams, and find better deals on the products and services you need.
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
February 23, 2009
- Comments
- Email This Article
- Print This Article
- Order a Reprint
Advertisement
Military personnel are prime targets for shady sales practices of financial criminals who want a piece of the troops' regular paychecks and often take advantage of their frequent moves. "Whenever you have a major mobilization of the armed forces, there are opportunities for individuals to use very aggressive sales practices," says John Oxendine, Georgia's insurance commissioner, who led a multistate investigation into insurance-sales abuses targeting soldiers.
Crooks know when units return flush with extra cash from tax-free combat pay. "The sharks are circling the bases," says Kathy Graham, president and chief executive officer of the Better Business Bureau of Coastal Carolina. "Individually, our soldiers don't make a lot of money. Collectively, it's a big payroll."
Five years ago, Kiplinger's Personal Finance magazine revealed that soldiers had often been pitched investments that included a whopping 50% sales charge in the first year. That's right, half the money went into the pocket of the investment firm and salesman, not toward the servicemember's nest egg. This was followed by reports that young service-members were being sold expensive life-insurance policies they didn't need -- and didn't even realize they were buying.
After a flurry of nationwide investigations and congressional hearings, several companies were ordered to pay multimillion-dollar fines and change their sales practices. And new laws and Department of Defense rules have been passed to help protect military personnel from the bad guys.
But you can't let down your guard: The problems haven't disappeared. Instead, abuses in the sale of insurance and investments -- not to mention outright fraud -- continue to surface. Con artists use military insignia to sell everything from bogus insurance to contaminated meat. And identity thieves are taking advantage of deployments and the military's ubiquitous use of Social Security numbers to find new victims.
Increasingly, though, state and federal regulators, local organizations and the military are on the alert. "We've seen the increasing costs of these personal-finance problems," says Holly Petraeus, director of BBB Military LineĻ, which provides consumer education to military families. "People were even losing their security clearances." Here's how to protect yourself from inappropriate sales practices and outright scams that target military families -- and find far better deals on the products you need.
Affinity Fraud and Scams
Criminals have no qualms about fabricating an affiliation with the military to gain a family's trust. Often these are small-time operators who go door to door. In one case, a salesman was peddling phony life insurance just before deployment, preying on families' fears . . . and disappearing with hundreds of dollars in "premiums." In another case, a man claiming to be with the naval-base commissary in San Diego sold tainted meat to Navy families who lived on base.
Military spouses looking for a new job in a new town are susceptible to work-at-home scams, and they often shell out $50 to $200 or more for start-up kits and get nothing in return. And BBB recently uncovered a scam in which a con artist pretending to be a soldier about to deploy advertised a too-good-to-be-true price for a used car in an online ad. His touching story, combined with a promise to use an escrow account to protect the buyer, attracted immediate attention. But the escrow account was phony and there was no car.
Sometimes scams are on a larger scale, as when thieves target a tightly knit group by associating themselves with a respected member of the group. For instance, the Securities and Exchange Commission charged three promoters in 2008 with allegedly running a real estate Ponzi scheme that cost about 75 investors an estimated $10 million. Many of the victims were in the military and had been solicited by a member of the Air Force who had been sucked into the scheme.
Permission to post your comment is assumed when you submit it. The name you provide will be used to identify your post, and NOT your e-mail address. We reserve the right to excerpt or edit any posted comments for clarity, appropriateness, civility, and relevance to the topic.
View our full privacy policy