Enzi: Report Shows Need to Protect Military Personnel from Sales of Shady Financial and Life Insurance Deals

Enzi: Report Shows Need to Protect Military Personnel from Sales of Shady Financial and Life Insurance Deals

A study released this week by the Government Accountability Office (GAO) confirms that thousands of young, inexperienced military recruits have fallen victim to the unscrupulous sales people pushing high cost financial products and life insurance.

U.S. Senator Mike Enzi, R-Wyo., introduced a bill earlier this year that he says would help remedy the problem. He urged his colleagues on the Senate Banking Committee today to back his bill and help him get it passed into law in order to protect military personnel.

"During a time when so many of our men and women in the armed forces are bravely fighting tyranny overseas, we must ensure that they are protected at home," Enzi said at a Senate Banking Committee hearing today called by the panel's Chair, Senator Richard Shelby, R-Ala., to discuss the GAO report.

The GAO report cited several examples of life insurance agents posing as military instructors arranging "veterans benefits" classes for recruits and trainees. Enzi said the sales pitch would start as soon as the commanding officer left the room. Many of the recruits would sign contracts and make payroll deductions because they believed the policies were endorsed by the Department of the Defense, but in reality the life insurance cost would be as much as 14 times higher than other available insurance and the benefits of the high-cost policies would be lower.

In other cases, military personnel were sold investments that have all but disappeared from civilian markets. Enzi said these funds, called contractual mutual fund plans, offer high up-front sales commissions that rob investors of years of earnings.

In 1966, the Securities and Exchange Commission recommended to Congress that it ban these types of funds, but Congress did not act.

"It is well past time to finally follow through and ban the sale of these funds. My bill would do this," Enzi said.

Enzi noted that throughout the GAO report it found that Department of Defense did not share information about these problems with other regulators who could have prevented these practices.

"A better system of information sharing is needed to effectively target bad actors and prevent them from ripping off our military personnel," Enzi said. "My bill, the Military Personnel Financial Services Protection Act, S. 418, would address these critical needs and draw clear lines of jurisdiction for regulators. It would also create a registry to track violators and ban the worst types of financial products from being sold to our military."

Enzi's bill has bipartisan support and is cosponsored by Senators Hillary Clinton and Chuck Schumer, both D-N.Y., and Chuck Hagel, R-Neb. The House passed a bill similar to Enzi's in June by a vote of 405-2. Enzi said with the strong showing in the House and the bipartisan support in the Senate he is hopeful there will be enough momentum to carry the bill into law next year.

http://enzi.senate.gov/milinsurance.htm