Tuesday, March 18, 2008
The Air Force and the Alabama National Guard are fighting a battle against an unlikely enemy -- bad credit.
If you've ever fallen behind in your bills, you know what it can mean -- answering calls from bill collectors, hocking your jewelry, watching your car be hauled off, declaring bankruptcy.
If you're a service member with a bad credit rating, add another headache to the list: having your security rating damaged, too. And no security clearance means you can't do the job you've been trained to do.
Not a new problem
The military has dealt with bad credit before. Two Department of Defense surveys in the last decade -- 1997 and 2002 -- showed that more than a quarter of service members had financial problems.
The 1997 survey found 27 percent of service members had trouble paying their bills and 21 percent reported being called by bill collectors. Nine percent had pawned valuables and 4 percent reported they've had utilities disconnected, had cars and trucks repossessed, or had to declare bankruptcy.
The 2002 study found that one in four junior military members had serious problems making ends meet. Another 4 percent regarded themselves as "in over their heads" financially. About 20 percent of military members reported being pressured by creditors -- about twice the rate of civilians polled in the same survey. And 27 percent of military members said they had trouble paying bills, compared to 19 percent of civilians.
The credit problems were worse in the Army and Marine Corps. The Air Force had the fewest problems. The Navy estimated it lost $250 million in productivity and salary losses because of poor financial management by service members.
Control the predators
One way the military has tried to address credit problems is by making predatory lending a major focus. The Department of Defense issued a regulation in October aimed at curbing the problem.
Lending companies now are required to ask loan applicants if they are in the military or a military dependent. The regulation capped the annual percentage rate at 36 percent for service members and their families. It addressed three major areas -- payday loans, vehicle title loans and tax refund anticipation loans.
"These were the most egregious practices, these three that were tackled by this regulation," Pentagon spokesman Lt. Col. Les Melnyk said when the rules took effect. "These were the ones subject to the most abuse."
Security risks
One of the biggest reasons for concern is the security risks associated with bad credit, said military leaders.
The military uses 13 guidelines to determine initial and continued eligibility for access to classified information. Any soldier or airman with a shaky financial history could be considered unreliable or untrustworthy and therefore a security risk.
"Questions arise whether the individual can be relied on and trusted to exercise the responsibility necessary for working in a secure environment where protection of classified information is paramount," said Pentagon spokesman Lt. Col. Patrick Ryder.
Security clearances are necessary for almost all of the 1,200 members of the 908th Airlift Wing at Maxwell Air Force Base and scores of Alabama National Guard members. At the 908th, the paperwork process for security clearances starts as soon as airmen join the wing.
"All available, reliable information about the person, past and present, favorable and unfavorable, is considered in reaching a clearance determination," Ryder wrote in an e-mail.
Bad credit, change jobs
In the 908th, hundreds of airmen are finding that they can't do their jobs because of their bad credit, said Chief Master Sgt. David Fanning, the wing's top enlisted airman.
"That's just bad," Fanning said. "We spent all this money training them and now we can't use them the way we were going to use them because they don't have security clearance."
The airmen who lose their security clearance usually are shifted to another job while they get their credit back on track, said Col. Jon Andre, vice commander of the 908th.
Where and how an airman gets shifted depends on his or her skills, job specialty and the Reserve unit's needs at the time, he said.
Andre doesn't know the number of airmen impacted by lost security clearances due to financial issues at the 908th, but he said it happens all too often.
Military members who lose their security clearance can appeal to get the clearance back. Ryder said the law gives service members two options to appeal.
They can submit a written response to the Personnel Security Appeal Board. The response must state reasons why the decision should be reversed and include any additional information that might affect the decision.
Or military members can appeal in person before an administrative judge to provide information on why the decision should be reversed. The final decision still is made by the board.
Managing debt 101
Trying to reverse the trend, Andre and Fanning came up with the Wingman Readiness Workshop to help teach service members better money management skills.
Fanning solicited the help of the Airman and Family Readiness Center at Maxwell to create the workshop. It focuses on savings plans, basic investing, payday loans, getting out of debt and understanding credit.
"We're trying to give them some of the tools to be successful, because to be a successful reservist you have to have your civilian life under control," he said.
The 908th has created its own version of the workshop.
Fanning said that he's known about similar classes at other bases for active-duty airmen, but fitting the workshop into the reservists schedule was tough since they typically work one weekend a month -- a weekend that's packed with skills training.
The 908th wrapped up its second class earlier this month. A third session is planned for May.
About 30 people attended the first two classes, Fanning said. Officials from the 22nd Air Force, which oversees the 908th, came to watch the workshop. Andre said the concept is spreading to other units.
The workshop is designed for airmen ages 18 to 23, Fanning said. Those young airmen make up nearly 50 percent of the wing, he said.
"Even though we open it up to more, we're really targeting the younger enlisted (airmen) that come in here," Fanning said. "They get a paycheck and then we send them back out to the real world."
Keith Rollins is 42 and has been with the 908th for about 17 years. Even though he's in good financial shape, he figured a refresher couldn't hurt.
"I wish I had had this when I was a lot younger," he said.
Rollins learned a few things. He knew companies checked credit scores for a mortgage, but he didn't realize it was checked for car insurance and renting apartments.
Guarding against it
The same 2002 Defense study gave some indications of why financial problems have even more impact on the Guard.
It pointed out that financial problems are more common for deployed members (more than one-month deployment in past year) than for members with no deployment history. It also found that service members with a second job have more money problems than those not moonlighting in the civilian sector.
Guard members with lucrative civilian jobs may be paid far less when they are activated. Some employers have programs in place to help deal with this pay discrepancy, but most Guard members suddenly find themselves with more bills than money to pay them.
The reverse also can be true, said Steve Missildine, director of soldier and family programs for the Guard.
When Guard members make more on active duty than in their civilian jobs, they can start spending based on those active duty wages. Once they return to civilian life, it's often difficult for them to control their higher spending, he said.
All this makes financial management a key concern for the Guard, and has made teaching soldiers how to handle their cash a new area of training.
"There's not a day that goes by that we don't have a Guard member who's in financial difficulty," Missildine said.
Worth the effort
The Guard is actively looking to develop a program for its soldiers similar to the 908th workshop.
Tom Hanna is the manager of the Mission Services Department at Maxwell --including the Airman and Family Readiness Center. He said that through research and the classes his staff teaches, they've found that the average person is not concerned about finances.
"And most of them don't want to know about it until it becomes an issue," Hanna said.
But financial responsibility can affect more than the individual and having finances in order takes some stress out of the process, Andre, Fanning and Hanna said.
"When you get right down to it, a good reservist is somebody who is mobilization ready ... and for them to best be able to do that, they have to be financially secure," Andre said of aggressive efforts to teach service members money management skills.
"It's a win-win because it's a tangible benefit to the individual and also pays benefits to the wing and the nation as a whole."
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