CFPB Report Highlights Financial Troubles of Young Veterans

Without drawing any conclusions why it is happening, a report released this week by the Consumer Financial Protection Bureau reveals that young servicemembers are significantly more likely to have negative items appear on their credit reports around the time they leave active duty.

Servicemembers who serve between seven and 35 months before leaving active duty are between two and 10 times more likely to become delinquent or to default on auto loans, credit cards, or personal or retail installment loans, according to the report.

The average credit score of a servicemember who leaves after serving between seven and 35 months is 607, compared with a 654 score for those who serve longer than three years, according to the report.

The number of individuals with medical debts placed with a collection agency is twice as high for those who served between seven and 35 months compared with those who served at least three years. The report said it was impossible to determine whether the medical debt was incurred prior to, during, or after leaving the service. And nearly 35% of those who serve between seven and 35 months have a non-medical debt in collections in the third and fourth quarters following their separation, compared with about 20% for those who serve at least three years. The most common type of non-medical debt are cell phone bills, according to the report. Only 8% of those sampled had a debt in collections at the time they entered military service.

Servicemembers who leave “may experience a significant drop in income in the year after separation,” according to the report, which could explain why young veterans are having problems keeping up with their debt payments.

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