Defense Credit Union Issues

Updated February, 2010

Housing Assistance Program

The Administration announced the Defense Department’s plan to expand its housing assistance program with $555 million devoted to servicemembers forced to sell their homes at a loss due to the country’s struggling housing market. The financial support comes from President Barack Obama’s American Recovery and Reinvestment Act, to supplement the department’s Homeowner’s Assistance Program. The funds are allocated to provide benefits to military and civilian employees, according to a specific priority order, who suffered housing financial losses since 2006.

Several times during a standard military career, military members may be ordered to change duty stations to meet the mission requirements for their respective branch of service. Duty calls on servicemembers and their families to relocate and establish a new home as frequently as every two to three years. Many have moved because of base closures under the 2005 Defense Base Realignment and Closure Act. Some families have been forced to sell their homes despite the possibility of losing thousands of dollars amid the country’s struggling economy and housing market. Many military members cannot afford to own a home near Fort Bragg, NC, and rent or buy another near Scott Air Force Base, IL, for example.

This initiative is not entirely new, however. The Pentagon has offered and provided similar financial assistance to military and civilian employees for more than 40 years, defense officials have said. Until now, the program’s primary support has focused on those who owned homes and lost money near closed or soon-to-be closed-down military installations under BRAC.

With the expansion, the Pentagon can now provide partial reimbursement for home-sale losses to other groups. The priority order for the benefits, according to Pentagon officials, are as follows:

-- Wounded servicemembers relocating for treatment or medical retirement, and for the surviving family members of those who have died while on deployment.

-- Military and Defense Department civilian employees affected by BRAC without the need to prove whether the base closure or the general housing market decline caused the loss.

-- Normal permanent change of station moves, but only on a retroactive basis that covers PCS moves between July 1, 2006, through Dec. 31, 2009.

All active and former members of the Army, Navy, Marine Corps, Air Force and Coast Guard, as well as DoD civilians who have sold a home since 2006, may visit the Homeowners Assistance Program Website to learn about specific program criteria and eligibility.

More information is available at http://hap.usace.army.mil

Military Saves

The campaign to build wealth and reduce debt couldn't be more timely. A healthy savings account and low or no debt load is a military family's best approach to challenging economic times. Military members have solid benefits and steady paychecks, and are in a terrific position to save money out of each one of those paychecks.

Military Saves is a collaborative effort by the military services, the Department of Defense, non-profit organizations and associations, and financial institutions to provide both a favorable climate for saving money and attractive accounts in which to save. People buy what they are offered, and Military Saves financial institutions offer military families the absolute best in savings and investment products. The quality and variety of products offered by defense credit unions gets better and bigger every year. As we enter the third year of the campaign and expand our scope and messaging, we applaud our credit unions for matching our efforts with unbeatable incentives, returns, marketing, and member care.

The new in 2009 quarterly themes -- Save and Invest, Military Youth Saves, Debt Reduction, and Save for Retirement -- invite more creative product development and packaging, and offer year-round promotional opportunities. Build wealth, not debt!

The 2010 Military Saves Week will be held from February 21 to 28.

Materials are available at: http://www.militarysaves.org/resourcekit/default.asp

AAFES/JP Morgan Chase Credit Card

NAFCU has been engaged both with the Department of Defense (DoD) officials and Congress in order to ensure that this product does not violate longstanding DoD regulations.

Many Members of Congress along with the individual services have expressed concerns over the violations of DoD regulations. It is our belief that that this card is in violation of DODD 1000.11 par. 4.1.1, also known as the one bank, one credit union rule.  And that by AAFES advertising and providing the application for this card it adds a third financial institution to the base financial services in violation of DODD 1000.11 par. 4.1.1

We also hold that DoD Financial Management Regulation (FMR) Volume 5 Chapter 34, 340403 states that Military Exchange Services cannot distribute literature from off-base financial institutions if there is an on-base financial institution.  And that DoD FMR Volume 5 Chapter 34, 340410-A states that retail banking operations shall not be performed by any DoD component or non appropriated fund instrumentality including the Military Exchange Services and MWR activities.

NAFCU has obtained a copy of the agreement between AAFES and JP Morgan Chase regarding the product, and we will continue to pursue a resolution to these violations of DoD regulations. 

On base credit unions provide a full range of financial services to the armed services and their families under a contract with each base (to include credit cards).  The on base credit unions are able to develop a relationship with our men and women in uniform and their families and provide them with the necessary financial education to establish and maintain good credit, as well as determine the financial products that are right for them.  This is in direct contrast to the credit card being offered by AAFES, which can and will lead to more debt, without an upside of promoting savings good financial habits.

Related Files

2010 DoD Military Saves Memorandum.

DoD Report on Implementation of Limitations on Terms of Consumer Credit Extended to Service Members and Dependents.