LIANE HANSEN, host:
Among the forces lined up behind the new consumer financial protection agency proposed by the Obama administration, one stands out as used to a tough fight: the Pentagon. And as one official put it, personal financial readiness equates to mission readiness.
NPR's John Ydstie reports.
JOHN YDSTIE: On Thursday of this past week, Pentagon officials came across the Potomac to meet with Treasury Secretary Timothy Geithner to discuss the proposed consumer agency, in a big conference room at the Treasury. As the meeting closed, Geithner summed up this way.
Secretary TIMOTHY GEITHNER (Treasury Department): We heard today a lot of examples of how great the problem still is across the country for people who are serving their country overseas, fighting for Americans.
YDSTIE: Among the greatest consumer financial threats faced by members of the armed forces: unscrupulous automobile sales.
David Julian, the director of the Office of Personal Finance at the Department of Defense, was at Thursday's meeting at the Treasury.
Mr. DAVID JULIAN (Director, Office of Personal Finance, Department of Defense): With our troops being very young, primarily their largest financial obligation that they have is a vehicle. And since they do have a guaranteed paycheck, they do have other benefits, it could make them an attractive target for harmful practices.
YDSTIE: Practices like bait and switch financing and falsification of loan documents - shady practices even lots of older consumers fall victim to.
Lacie Riso and her husband, Jarred Whited, a sailor on the aircraft carrier USS Ronald Reagan, have a story that's typical of what many service members face. Lacie, who is 18 years old and Jared, an aviation ordnance man who's 20, needed a car because their old one was breaking down. They went to a dealer near their base in San Diego and found a used Hyundai Sonata they liked. Then, says Lacie, the salesman contacted a finance company.
Ms. LACIE RISO: And they say, you know, we'll approve them. They need to pay 394 a month. So we are like, you know, we can do that. That's fine.
YDSTIE: Lacie and Jared get the keys. They leave Lacie's old Ford Focus as a trade-in. The next day, they go back to the dealer to set up an automatic payment to the finance company from Jared's military paycheck. But after several weeks, the finance company said the loan wasn't approved after all. Lacie and Jared then asked the dealer for new payment information.
Ms. RISO: So we say, you know, what bank do we pay this to? What's the account number that you have? And he told us, no, I don't have anything like that. You can pay me cash or personal check to me at the dealership.
YDSTIE: Lacie and Jared say no. The dealer repossess the Sonata. They tell him to give back the more than $500 theyve made in payments, along with Lacie's Focus.
Ms. RISO: And he said, oh, no. You're never going to see your Focus again. Your car was repossessed for nonpayment and you can pay me $800 to get back in this contract.
YDSTIE: Lacie and Jared get an attorney and sue the dealer. Meanwhile, the dealer and his lawyer say they did nothing wrong. The whole thing is causing Jared a lot of anxiety, says Lacie.
Ms. RISO: He's stressing out about, you know, is my wife going to be able to make it without me here? I'm going to be out at sea, you know, she can't get a job without a car. It's just really stressful on him.
YDSTIE: That's just the kind of stress the military worries can keep service members from focusing on their jobs and compromise the military mission.
While the Pentagon welcomes the protections a consumer financial protection agency might give to service members, David Julian says it's not the DOD's role to actively lobby for it.
One final note: The House version of the consumer agency exempts auto dealers from oversight. The version making its way through the Senate does put auto dealers under the consumer agency's authority.
John Ydstie, NPR News, Washington.
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