ROAM Database "Repeat Offenders Against the Military" Draws Bead on Swindlers

January 26, 2012

Their presence outside military bases has become all too familiar: businesses peddling cars, electronics and other items with undisclosed conditions or sky-high interest rates that quickly become a financial nightmare for service members.

Today, the Consumer Financial Protection Bureau announced as one of its first orders of business that it is partnering with the Federal Trade Commission to put a stop to such scams.

The bureau, which was created to consolidate financial regulators and protect consumers, has created a national database to share between state and federal law enforcement with information about companies that target military members for consumer and financial fraud.

Richard Cordray, the former Ohio attorney general whom President Barack Obama appointed as director of the bureau earlier this month, said coordination among law enforcement agencies -- and their input -- is critical to prosecuting scam artists who prey on service members and their families.

The database -- dubbed ROAM for Repeat Offenders Against the Military -- is accessible only by law enforcement, and is an extension of the FTC’s Military Sentinel Network, a public website where people can report scams against service members, Cordray said.

New York Attorney General Eric T. Schneiderman, who attended today’s announcement, came up with the idea for the database after filing a lawsuit in 2010 against Rome Finance Co. of Concord, Calif., for defrauding nearly a thousand soldiers at Fort Drum, N.Y., as well as service members in at least five other states. The company agreed to repay $3.5 million to the Fort Drum soldiers and restore their consumer credit ratings in a legal agreement reached in August.

Schneiderman called the case “one of the most egregious things I’ve seen in my time” in which the company’s retailer, SmartBuy, sold laptop computers at highly inflated prices to service members. Under the scam, he said, service members were forced to use the company’s financing plan, which was paid directly from their military paychecks with interest rates that eventually hit 19 percent. Some soldiers ended up paying more than $7,000 for a computer worth no more than $2,000, he said.

The Fort Drum soldiers were particularly vulnerable, Schneiderman said, because the base was “an extremely active jumping-off point” for deployments to Iraq, with soldiers busy and distracted by their jobs and relocations.

Few are more familiar with the situation than Holly Petraeus, the bureau’s assistant director of service member affairs and wife of retired Army Gen. David H. Petraeus, CIA director and former commander of U.S. forces in Iraq and Afghanistan.

“As someone who has lived in military communities my entire life, I’ve seen firsthand” how some companies prey on military members, Petraeus said. “I continue to hear stories of service members being ripped off by businesses who see them as easy targets to a quick profit,” she said, adding that some compare the predatory nature of sales people who set up outside military bases to bears at a trout stream.

Service members are a favorite prey, she said, because “they have a guaranteed paycheck, and they’re not going to quit or get laid off.” And, she added, a military base sometimes is the largest employer in the area.

Too often, Petraeus said, when a business is shut down at a base in one state, it simply moves to another – something the national database is designed to prevent.

Among the latest scams, Petraeus said, is one in which people claim they can help elderly veterans with their applications to receive the Veterans Affairs Aid and Attendance benefit, which can pay as much as $2,000 per month. In soliciting their services, the scammers gain access to the veterans’ financial records, she said.

The FTC received more than 17,000 complaints of military-targeted financial scams last year, FTC Commissioner Julie Brill said, precipitating months of meetings at military installations around the country to hear complaints and collaborate with the services on financial training.

Service members are a particularly vulnerable group of consumers, Brill said, due to their young age, independence and lack of financial experience.

The database “is about being effective, efficient and responsive” in prosecuting scam artists, she said.

Petraeus urged service members to protect themselves by understanding what the total price of a product with interest -- not just the monthly payment -- will be before buying, and to consult financial and legal guidance on base.

“They have great legal services available to them,” she added.