Did you know that our U.S. military personnel are between 2- and 10-times more likely to have delinquencies or defaults on their credit reports in the six months after leaving active service compared to the six months before?
That’s according to a new Consumer Financial Protection Bureau (CFPB) report released this week. The reasons for the default were not revealed in the report, but the American Financial Services Association would like to understand this pattern better as well, according to their website.
What can your institution do to help support our servicemembers regain their credit or assist them in not going delinquent in the first place?
1. Hire Military
Leaving full-time active duty may take servicemembers a few months to find employment. These people have been in some desolate places and perhaps even dodged bombs for our freedom, yet the idea of finding a job outside the military might be one of the scarier things they’ve had to face. One friend told me recently how she wasn’t sure her skillset learned in 20 years of the military world would translate in the civilian world. Of course, she quickly learned her skillset fit in just fine if not better than her co-workers.
Mariner Finance, one of our partners, actively recruits military and promises them training with their Jobs for Veterans Initiative.
GOLDPoint Systems has also actively hired many veterans. Rick Alvernaz, senior vice president of development at GOLDPoint Systems, who is also an Air Force veteran, received an award from the Office of the Secretary of Defense. This award recognized him as a “Patriotic Employer” for supporting employee participation in America’s National Guard and Reserve Force.
2. Offer Flexible Re-payment Options
If you notice a servicemember falling behind on payments, perhaps you could offer them some alternative repayment plan options. Instead of making a monthly payment, perhaps smaller weekly payments would be easier to maintain.
You may also consider setting them up with seasonal payments. Seasonal payments spread payment amounts during specific times of the year, with no payments due at other times of the year. This might make sense if the active military or reservist has a seasonal job, such as landscaping or hanging Christmas lights, as well as their military duties.
3. Review the SCRA to Ensure You are in Compliance
The Sailors’ and Soldiers’ Civil Relief Act has been around since 1940 but has been updated through the years to now be the SCRA. The SCRA provides a wide range of benefits and protections to those in military service. The biggest benefit is that the SCRA limits the amount of interest that may be charged on certain financial obligations that were incurred prior to military service to no more than six percent per year, including most fees. This is for active military who have been deployed due to military duties.
If extending a loan to active military personnel (deployed or not), you’ll also want to make sure you’re in compliance with the Military Lending Act. Our software can connect to the Military database that ensures the servicemember is in the military and that certain interest caps on loans must be adhered to.
4. Allow Deferments if Possible
Deferments are a sticky issue to write about. They’re not always allowed depending on the state or type of loan. But if your institution allows deferments on certain loan types, perhaps a call from one of your friendly employees would brighten a veteran’s day who is having trouble meeting their loan agreements. Especially if the veteran is currently without a job, being able to not worry about a payment that month may relieve some stress.
5. Send a Letter, Email, or Text of Thanks
A thank you letter, email, or even text seems far too small of what we owe our military. But it can also establish a relationship with that servicemember to assure them you are on their side to help. Building relationships is a huge part of lending. People need to feel their lending company is friendly and trustworthy, and communicating gratitude for services rendered may help strengthen that connection.
Our software can enable you to create specific letters, emails, or texts based on user-defined fields of information. It might be small, but it might also mean a lot to someone who selflessly gave so much.