Military Personnel: DOD's Predatory Lending Report Addressed Mandated Issues, but Support Is Limited for Some Findings and Recommendations

Serious financial problems can adversely affect unit morale and readiness as well as servicemembers' credit histories and military careers. If servicemembers experience serious financial problems, they may be subject to adverse actions such as loss of security clearances, criminal or nonjudicial sanctions, or adverse personnel actions including possible discharge from the military. The Department of Defense's (DOD) Social Compact, which is part of its human capital plan, notes that mission readiness and quality of life depend on whether servicemembers use their financial resources responsibly. For these reasons, Congress and DOD officials have expressed concerns about servicemembers' financial conditions. DOD is particularly concerned about the use and effects of certain consumer loans that DOD identified as being predatory. The 2006 National Defense Authorization Act required DOD to issue a report on predatory lending directed at servicemembers and their dependents. The mandate required DOD's report to include: (1) a description of the prevalence of predatory lending practices directed at servicemembers and their families; (2) an assessment of the effects of predatory lending on servicemembers and their families; (3) a description of DOD's strategies and programs to educate servicemembers and their families about predatory practices; (4) a description of DOD's strategies and programs to reduce or eliminate the prevalence of predatory lending practices directed at servicemembers and their families, as well as the negative effects of such practices; and (5) recommendations for additional legislative and administrative action to reduce or eliminate predatory lending practices. Following the publication of DOD's 2006 report, private-sector groups associated with segments of the financial industry raised concerns about the report's preparation, quality, and recommendations. Congress requested that we review DOD's 2006 report on predatory lending practices. Specifically, we evaluated DOD's approach and support in preparing its mandated report on predatory lending practices. This report documents findings that we briefed to your offices on August 17, 2007.