After serving overseas, military service members return home to face a new economic reality that often includes, unfortunately, lenders looking to take advantage of their vulnerability.
These so-called predatory lenders, which pop up around military bases, try to entice or deceive young soldiers into taking out loans that impose abusive or unfair terms.
"Predatory lenders like to prey on young military members because they're often inexperienced with money, have little to no credit and are usually very excited to spend that first paycheck," said certified financial planner Tara Falcone, founder of the financial education company ReisUP. She is also a former hedge fund analyst and is married to an officer in the U.S. Navy.
The end result is a loan that carries a hefty price tag, with sky-high interest rates and hidden fees. For example, if a soldier is convinced to take out a payday loan, which requires a check dated for the next payday, he could ultimately wind up with an interest rate near 400%. Unscrupulous auto lenders and credit card companies have also been known to target members of the military.
"One of my husband's sailors came to him one day and told him that a car dealership located near base had convinced him to take out a loan for twice the value of the car ... [at] an interest rate of nearly 20%," Falcone said.
To remedy the situation, the sailor went to a local federal credit union, got a new loan at a lower rate and then paid off the predatory loan.
"By doing that, they saved over $100 on their car payment every month and over $7,000 in interest over time," she said.
The government has moved to crack down on predatory lending, enacting the Military Lending Act in 2006. The law caps the interest rate on most consumer loans at 36%, yet military and veteran organizations have recently expressed concern about a lack of lender monitoring.
Last year, the Consumer Financial Protection Bureau stopped checking for compliance with the law. Earlier this year, the CFPB's new director said the agency lacked explicit supervisory authority and requested that Congress give the CFPB that power.
"What we are seeing is really a pattern of neglect around consumer protections both for consumers generally, who are targeted by payday lenders, but also a disregard for fully implementing the Military Lending Act and making sure military members are not targeted by high-cost, abusive lenders," said Tom Feltner, director of research at the Center for Responsible Lending.
A CFPB spokesperson said the bureau is "committed to the financial well-being" of U.S. service members.
"This commitment includes ensuring that lenders subject to our jurisdiction comply with the Military Lending Act, so our servicemembers and their families are provided with the protections of that law," the spokesperson said.
However, if you're in the military, there are some things you can do to ensure you do not become another victim. Not only does predatory lending cause undue financial stress, it can also negatively impact a soldier's military readiness, said Falcone.
Here are four tips from Falcone that can help servicemembers protect themselves.
When trying to get a loan, arm yourself with information before you start the process. That means knowing your credit score and familiarizing yourself with current interest rates, as well as the fair value of the item you are going to purchase, Falcone advises.
"Don't just trust that the lender is going to tell you the right thing," she said.
You need to look beyond just the monthly payment when it comes to figuring out your budget, said Falcone. Instead, know the "all-in cost" that you can afford, which includes taxes, fees and interest.
Predatory lenders may try to coerce you into making a commitment by throwing around jargon you may not fully understand. Therefore, before looking into a loan, make sure you know how the process works.
"You need to understand how lenders can manipulate all the different factors in the loan borrowing process — that includes interest, payment and term — in order to sway it in their favor and make it seem like you're getting a really good deal," Falcone said.
Never take out a loan unless you have the answers to any questions you may have.
"When it comes to your money, you are the authority," Falcone said. "If you have questions, make sure to ask them and, if anything feels crazy or strange, be prepared to get up and walk away from the deal."
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.