Servicemembers

I know, you don’t have to file your taxes until April 15th (and if you’re in a combat zone you can delay even longer), but you may want to file as soon as you’re allowed – especially if you’re due a refund. So let’s talk taxes for a minute.

First of all, if you don’t earn much money, you may qualify for something called the Earned Income Tax Credit (EITC). That’s a tax credit from the government that can amount to several thousand dollars. You should take the time to find out if you qualify and if you will save money by claiming the credit.

There are even special military rules for the EITC. Nontaxable military pay like combat pay, the Basic Allowance for Housing (BAH), and the Basic Allowance for Subsistence (BAS) don’t count as earned income when you do your EITC calculations. But you can opt to include nontaxable combat pay in earned income for EITC, which might result in an even larger EITC credit for you. It’s definitely worth doing the math both ways to see which works out better for you.

If the idea of math and tax calculations makes your head hurt, think twice before paying someone to file your taxes for you. Did you know there is likely to be a tax office on your base that will help you fill out the forms – for free? Its volunteers are trained by the Volunteer Income Tax Assistance (VITA) program of the Internal Revenue Service (IRS) – and there are also VITA tax centers in many local communities offering free tax-preparation assistance to those who make $50,000 or less. Why pay for what you could get for free at a VITA center?

If you like to use computer software programs to do your taxes yourself, you also have no-cost options for that. Military OneSource offers a link to free tax-prep software for the military, and the IRS also offers a variety of free tax-prep software if your adjusted gross income is $57,000 or less.

So, once you’ve filed your taxes you may be getting a nice refund. Although spending the refund right away may be appealing, consider saving or investing part of it, or using some of it to pay off debt. The IRS gives you flexibility by offering a split payment option for your refund. You can fill out IRS Form 8888 and they will divide your refund payment between up to three accounts that you designate. You decide how much goes where. And, if you’re thinking long-term, you can also tell the IRS to use part or all of your refund to buy U.S. Series I Savings Bonds for yourself or someone else.

And remember, if you get a big tax refund every year, you might think about adjusting your withholding so you don’t have so much taken out of your pay each month. Having a big refund is nice, but consider that you could have that money going to paying off debt or earning interest in a savings account all year, rather than waiting until you get the money back as a tax refund!

An important step to ensure that servicemembers and veterans are not seen simply as “dollar signs in uniform.” We continue to work with federal and state agencies to make sure that student veterans can get the most of out of their benefits and avoid crushing student loan debt. Learn more about the GIBill.com settlement.

Cross posted from the US Department of Veterans Affairs.

By Alex Horton

For about two years, VA’s online communications team has been closely tracking the advertising and recruitment efforts of for-profit schools looking to bring in GI Bill tuition dollars. In some cases, these schools have ensnared Veterans looking for info by using official-looking websites, which funneled potential recruits to those schools without any balanced, objective information. We aimed to get the word out in order to help Veterans make the best decision possible.

This all came to a head earlier this year, when a group of state attorneys general led an effort to sue the company that owned GIBill.com, a particularly deceptive site. The company settled, and the website was turned over to VA and now redirects to our GI Bill page.

Today, VA announced the next step in the fight against misleading info campaign waged by schools after your hard-earned benefits. The term ‘GI Bill’ has been trademarked by VA with the U.S. Patent and Trademark Office. VA is the sole owner of the mark, and in the coming months, it will issue terms of use for the phrase. This move goes a long way to enforce accountability to those who would deceive student Veterans for financial gain.

Of course, with millions of dollars up for grabs, schools and marketing firms won’t lie down because of the trademark, so we’ll remain vigilant to ensure Veterans aren’t victims of deceptive recruitment when they decide to make the most out of their education benefits.

Alex Horton is the senior writer for Vantage Point.

Today, along with the Federal Trade Commission (FTC), our Office of Enforcement sent letters to a number of lenders concerning potential violations of the Mortgage Acts and Practices – Advertising (MAP) Rule, a new rule that took effect in August 2011. The MAP Rule addresses claims and statements in mortgage advertising that may be misleading to consumers.

Many of these potentially misleading practices seem to be directed at older Americans and servicemembers/veterans. So today we are writing jointly to highlight things to be on the lookout for when you get mortgage advertisements. We have seen examples of the following potentially misleading practices through our complaint system, and also heard about them as we travel the country talking to consumers.

Be suspicious of ads with:

• Official-looking seals or logos that imply some kind of government status, for example making you think they come from the VA or HUD. Although government agencies do guarantee some loans, they are not involved in the actual lending or advertising of loans.
• Promises of amazingly low rates – which may turn out in the fine print only be in effect for a short period and then will readjust to a higher amount.
• Promises that a reverse mortgage will let you stay in your home payment-free. Typically borrowers with reverse mortgages still have to keep up with tax and insurance payments – and will most likely lose their homes if they don’t.
• Announcements of “pre-approval” and large amounts of cash or credit available to you. Typically there’s no guarantee that you will be approved for a loan, or the size of the loan, until you go through a standard qualification process.

You know the old saying: “If it sounds too good to be true, it probably is.” Some advertisers will use your military or veteran status as a way to approach you, promising special deals or implying VA approval. Others will use the lure of a “no-payment” reverse mortgage to troll for older Americans desperate to find a way to stay in their home when they can no longer afford a mortgage payment. And although mortgage rates are very low right now, an offer promising “historically low rates” may still have hidden traps that turn it into a bad deal.

So please, be cautious. If you get an ad that sounds a little (or a lot) too good to be true, you should get more information from a trusted source before you respond to the offer. The FTC has published a consumer alert on deceptive mortgage ads and what to look for. We also have more information about mortgages and other financial products on our website at Ask CFPB, as well as specific information for veterans and older Americans. Take the time to know before you owe!

November 11th, Veterans Day, is a day for our nation to thank all those who have worn the uniform of our country. They answered the call to serve, and we are very grateful that they did!

There are estimated to be over 20 million U.S. veterans living today, and we are proud to count a number of them among our ranks at the Consumer Financial Protection Bureau (CFPB). On my team at the Office of Servicemember Affairs (OSA) we have veterans of the Army, Marine Corps, Navy, and Air Force. We can truly say we have a joint perspective on military matters, and that the voice of the veteran is embedded in everything we do in OSA and heard throughout the CFPB!

Did you also know that November is National Military Family Month? We have a couple military spouses on our team, too, to make sure we don’t forget military families when we go about our work. With those military families in mind, here’s a piece of very good news — effective November 1, 2012 — for military homeowners with Permanent Change of Station (PCS) orders who have mortgages owned or guaranteed by Fannie Mae or Freddie Mac.

If you own a house that has lost value and you get PCS orders, you might choose to do a short sale, which is when you sell your house for less than what you owe to your lender. In the past, if you have a Fannie Mae or Freddie Mac loan, you couldn’t qualify for a short sale unless you were behind on your payments, something no military member wants to be for fear it might affect his or her security clearance. And if you did qualify for a short sale, you may still have to pay back the difference between what you owed and the amount the house actually sold for.

Fannie Mae and Freddie Mac have now changed the rules for military homeowners on PCS orders that require relocating more than 50 miles one way from the military homeowner’s primary residence. These homeowners will automatically be qualified to do short sales for these residences even if they are not behind on their payments. Also, as long as the residence was bought on or before June 30, 2012, the servicemember with PCS orders won’t have to make up the difference anymore! That’s a very big deal!

There’s already enough anxiety that comes with getting a permanent change of station order. Many military homeowners owe more on their homes than their homes are worth because of the drop in housing prices following the financial crisis. When you get orders to move, we don’t think you should be stuck with a house thousands of miles away that you’re hoping will increase in value so you can sell. That’s why the recent change is so important for these military homeowners.

To see if you have a Fannie Mae loan, go to Fannie Mae’s Know Your Options website or check out their specific information about military options. To see if you have a Freddie Mac loan, see Freddie Mac’s information about how to get help with your mortgage. Freddie Mac also has more information about doing a short sale.

If you have a Fannie or Freddie loan and you get the runaround or incorrect/out-of-date information from your loan servicer concerning these new military PCS provisions, you can file a complaint with CFPB at http://www.consumerfinance.gov/complaint. We are here to help!

Today, I joined the Secretary of Defense at the Pentagon to announce a report about the servicing obstacles that servicemembers face in paying off student loan debt. The report, “The Next Front? Student Loan Servicing and the Cost to Our Men and Women in Uniform,” shows that servicemembers are having a hard time accessing the student-loan repayment protections granted to them under federal rules.

Since I began this job almost two years ago, I’ve visited over 40 different military installations – talking to senior leaders, military service providers and thousands of servicemembers and spouses. One thing I’ve heard repeatedly is that servicemembers are entering the military with – and sometimes because of –student-loan debt, and, as a result, are facing both financial challenges and paperwork challenges. And unfortunately they are not always getting the information they need from their loan servicers about programs and policies that could help them reduce that debt significantly while they’re on active duty.

We’re hearing that servicemembers are having problems getting their lenders to correctly apply their SCRA rights. They also don’t know about their repayment alternatives, and are getting inaccurate or incomplete information about their options. And they’re confused by eligibility requirements for benefits that are so complicated that they either can’t figure out what they’re entitled to or don’t realize that taking one benefit might exclude them from being eligible for another, more helpful, one.

One particular conversation with a young sailor stands out. He was just out of basic training at Naval Station Great Lakes. He told me that he entered the Navy with over $100,000 in student loan debt – and no degree! He joined the Navy because it was the only way he believed he could “make it,” but most of his Navy paycheck was going towards paying off those loans.

How he chooses to pay off his debt is not a matter of just a few dollars and cents. That young sailor could pay nearly $25,000 extra if he doesn’t receive his Servicemembers Civil Relief Act (SCRA) six-percent interest-rate cap while he’s on active duty. And if he stays in the Navy for 10 years but doesn’t know about or doesn’t use the Income-Based Repayment plan, the Public Service Loan Forgiveness program, and the SCRA rate cap, he could lose out on nearly $76,000 that he could have cut off his debt in those 10 years.

We’ll be teaming up with DoD to get the word out about military student-loan benefits and consumer protections. We’ve developed a “Guide for Servicemembers with Student Loans” with information on repayment options, as well as an FAQ section for military student loan borrowers at Ask CFPB. Servicemembers with problems in the servicing of their student loan debt can also file a complaint at consumerfinance.gov. And we want servicemembers to know that even if you didn’t ask for student loan repayment benefits when you entered active duty, it’s not too late to do it now!

Each May as we celebrate Memorial Day, our nation takes a moment to remember all of the brave men and women who died in service to our country. Memorial Day was first initiated as a day of remembrance for fallen soldiers during the Civil War but today it serves as a day to honor all servicemembers who lost their lives while serving in America’s conflicts.

While for some it’s just a day to barbeque or enjoy time off from work, for many of us Memorial Day is much more. Many people observe the day by visiting Arlington National Cemetery, going to museums, or participating in hometown parades. Some of us also use this day as an opportunity to connect Americans to our military community.

There are so many ways to get involved and make this day special. Checking in with someone who has a personal connection to a soldier involved in ongoing conflict makes a positive difference in that person’s day. Volunteering for the National Memorial Day Parade helps to build community and bring people from all walks of life together. And saying “thank you” to the men or women you see in uniform lets them know their sacrifice is appreciated.

The United States has been involved in significant conflict for over the last ten years, with two million American’s having served our country both stateside and overseas. Before coming to the Bureau, I had the great honor of serving my country in Iraq. As a former Soldier, I always appreciated (and counted) on the kindness and patriotism of my relatives, friends, and neighbors to care for my family while I was away.

I am proud to have served in the U.S. Armed Forces and I am proud to continue serving this country at the CFPB. It is our goal to connect with consumers while living our core values to Serve, Lead and Innovate. Our Office of Servicemember Affairs seeks to educate and engage with the public about consumer finance as it impacts Servicemembers and their families. At www.ConsumerFinance.gov servicemembers and their families can find information on a host of initiatives including ways in which we seek to combat financial scams targeted at military consumers. You can also find innovative tools, including our Financial Aid Comparison Shopper, complete with military benefits calculator, and student loan complaint system equipped to field concerns from servicemembers, veterans, and their families.

We thank the men and women serving our country, and on this special day we remember those who, in Abraham Lincoln’s words, gave “the last full measure of devotion.” We will always be mindful of their great sacrifice as we continue to serve the American consumer and those who wear, or have worn, the uniform for our country.