At Subcommittee Hearing, Members Examine How to Better Protect Military Community From Financial Scams and Fraud

Press Release

Today, Rep. Stephen F. Lynch, Chairman of the Subcommittee on National Security, held a hearing to examine how the U.S. government can help to protect servicemembers and veterans from financial scams and fraud, as well as better assist those who have been negatively affected by exploitive schemes.

"America's veterans remain vulnerable to financial scams seeking to defraud them of the pension, disability, and other service-connected benefits that they have earned through their dedicated service to our nation," said Chairman Lynch in his opening statement. "It is especially shameful that scammers will often prey upon their targets' sense of duty and patriotism towards their fellow servicemembers and veterans in order to exploit them."

Ahead of the hearing, Chairman Lynch introduced the Military Consumer Protection Task Force Act of 2022, which would establish a task force to collect data on, identify, and recommend ways to combat financial fraud against servicemembers, veterans, and military families. The Task Force would include representatives from several federal agencies and would be required to submit annual reports to the relevant congressional committees detailing its findings.

The Subcommittee heard testimony from Malini Mithal, Associate Director of the Division of Financial Practices within the Bureau of Consumer Protection at the Federal Trade Commission; Jim Rice, Assistant Director of Servicemember Affairs for the Consumer Financial Protection Bureau; Brendan Carr, a Commissioner of the Federal Communications Commission; Troy Broussard, Senior Advisor for the Veterans and Military Families Initiative at the AARP; and Robert Burda, Interim Chief Executive Officer and Chief Strategy Officer for the Cybercrime Support Network.

Witnesses testified about the unique personal and professional circumstances that make servicemembers and veterans opportune targets for scammers.

Mr. Rice testified: "Our younger servicemembers often do not have much experience with money but receive a steady paycheck. Taken together, these factors create an opportunity for lenders and businesses to target our military servicemembers for their hard-earned money."

Mr. Rice further also testified that: "Frequent relocation is part of military life, and permanent change of station orders often mean a new home, new utility connections, and other situations where a servicemember or spouse needs to share personal information like Social Security numbers, credit card numbers, and bank account information to a wide range of actors, most legitimate, others less so. As this process repeats itself, we are concerned that servicemembers are subject to increased risk of identity theft, data breaches, and other scams."

Mr. Burda testified that with the growing use of social media: "Even military recruiters are using social media to reach younger generations--one Army recruiter gets nearly half of her recruits from TikTok. However, from the perspective of a cybercriminal, social media functions as a simple way for them to find information about their targets. Cybercriminals are able to obtain sensitive information from social media--such as how long someone is deployed, birthdays, locations, phone numbers and names of family members--and can easily create fake profiles as bait to implement these scams."

Witnesses warned that fraudsters and scammers will often leverage and exploit military culture to target unwitting servicemembers and veterans.

In his testimony, Mr. Broussard warned that: "Scammers often use military jargon and specific government guidelines to craft an effective pitch to steal money from military members and veterans. Roughly one in three military members or veterans reported losing money to these types of service-related scams."

In response to a question from Ranking Member Grothman, Ms. Mithal described recent examples whereby nefarious debt collectors would target and call servicemembers and say, "[I]f you don't pay up, I'm going to tell your commanding officer, I'm going to ruin your military career."

Ms. Mithal testified about a recent FTC enforcement action, in which scammers "were pretending to be from the military." She continued: "They lured in people who were interested in serving our country, got their personal information using sites like Army.com and pretended to be an official recruiting channel. But then they turned around and sold that information to for-profit schools, who in turn use that information to make deceptive claims and get people to enroll."

Members and witnesses emphasized the importance of educating servicemembers and veterans about the risks of financial scams, as well as the need to hold bad actors accountable for taking advantage of the men and women that have worn our nation's uniform.

Mr. Broussard testified: "[U]nfortunately, for most of these unsuspecting members of the military and veterans community, the chance for restitution is slim-to-none because many criminal enterprises operate outside of the U.S., laws are outdated, or law enforcement is reluctant to prosecute."

Ms. Mithal testified: "We cannot rely on cases alone, or even rulemaking alone. Education outreach is critical…It really has to be work[ed] on all fronts. It can't just be one solution."

In response to a question from Chairman Lynch, Mr. Rice stated: "[W]e have a huge responsibility to ensure that they [servicemembers] are educated, but by the same token, at the other end of the extreme, we've got to hold those bad actors accountable. So it is the strength of the MLA [Military Lending Act] and SCRA [Servicemembers Civil Relief Act] that has to get that backbone to it."

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