The Center for Public Integrity

A young Navy sailor walks into a car dealership and buys a Camaro.

Sounds simple. But is it?

Advocates for military consumers say financing a car or truck is often a confusing transaction fraught with the potential for fraud, including hidden fees and bait-and-switch salesmanship.

Car dealers and their advocates counter that the transaction is usually a straightforward process. Rip-offs, they say, are rare.

Those competing views clashed Tuesday in San Antonio during a Federal Trade Commission hearing on the problems that sailors, Marines and other U.S. service members encounter when they try to buy and finance cars.

As the iWatch News reported last month, the FTC hearing is an indication of the increasing attention being paid to the consumer problems faced by members of the U.S. military.

Shawn Mercer, a Raleigh, N.C., attorney who represents car dealers, told FTC officials that critics of the car industry are painting with “too broad a brush,” using examples of “isolated bad players” or citing incidents from “bygone years.”

“To the extent there is an abuse somewhere, that’s an exception, not the norm,” Mercer said. He said car dealers aren’t looking for quick sales; they want to create a “customer for life.”

Other panelists described examples of practices targeted at service members, such as manipulating them into buying nearly expired repair warranties or charging them for overpriced add-ons.

U.S. Navy Capt. Dwain Alexander II, an attorney with the Navy Legal Service Office in Norfolk, Va., described one case in which a dealership hid the costs of financing the car by preparing two sets of paperwork and charging the service member $2,700 for a GPS mapping system that retailed for only about $200.

The Consumer Financial Protection Bureau has opened for business, its mailbox piled high with wish-lists from consumer advocacy groups about what the new agency should tackle first.

While consumer groups cheer the arrival of the CFPB, the banking industry and other financial services providers such as payday lenders, debt collectors, consumer credit bureaus and credit card issuers are less enthusiastic and worry that any new regulations could be costly and burdensome. Many Republican lawmakers share those concerns and have threatened to block the Senate nomination of Richard Cordray to head the agency.

Until the CFPB has a confirmed director in place, the bureau is limited to enforcing existing consumer protection regulations and generally cannot propose new rules.

Here is a closer look at some of the most common requests from consumer groups to the CFPB:

Make credit card offers easier to compare

Searching for the best deals on a credit card is notoriously difficult. Details on rewards programs are hard to find, and comparing fees and APRs is challenging because the box containing this key information looks different on each credit card company’s marketing materials. JPMorgan Chase & Co., for example, calls this box “Pricing and Terms” and places it in the middle of the page, while Citigroup Inc. places its “Terms and Conditions” on the upper left of the page.

The CFPB could help consumers by requiring a standard, one-page credit card contract.  “The card issuers are marketing a product to consumers. Consumers shouldn’t have to hunt for information about interest rates and fees. Really, this is in the best interest of card issuers, too,” says credit card expert Beverly Blair Harzog on Credit.com.

End hidden fees on pre-paid debit cards

Debt settlement companies play the middle man between consumers and their creditors.

Clients are often advised to stop paying their creditors and instead funnel their funds through the debt settlement companies, which will try to use withheld funds as leverage when negotiating with creditors. 

Debt settlement companies also promise to handle most telephone and mail contact with bill collectors. Some companies even give their clients a script to follow when creditors call.

Morgan Drexen, Inc., a California-based company, included such a script as an attachment to a contract to hire a West Virginia lawyer to help with clients' debt settlements. The telephone script, designed for sharing with clients, advises them that if creditors “ask you questions about us, don’t try and explain the program to them, have them contact us. If they ask you for any data on your personal situation, don’t give it to them, insist they talk to us.”

Following is a copy of the Morgan Drexen script, obtained by iWatch News. The document, and the rest of the contract are posted here.

YOU: Hi, may I help you?

CREDITOR: Yes. I need to speak to Mr. or Mrs. __________ concerning this overdue amount!!!

As part of our ongoing Debt Deception series, iWatch News is publishing stories about borrower nightmares, profiling Americans from different walks of life who borrowed money with terms they didn’t understand and couldn’t afford.

To get a better understanding of issues that many consumers are dealing with, we'd like to hear from more borrowers who are having trouble repaying their debt. Do you owe money on a loan with high interest rates? Did you sign up for a cash advance, but were unclear on the terms? Are you having trouble keeping up with your monthly payments?

Tell us about your experience by taking a few minutes to fill out the form below. Your response will remain confidential to reporters in our newsroom, and trusted partners within the Public Insight Network. You can also share your debt with us on Twitter by tweeting the amount you owe, type of loan, and interest payment with the hashtag #mydebt.

To mark the July 21 launch of the Consumer Financial Protection Bureau, a new regulator with broad powers,  iWatch News is publishing stories about borrower nightmares: Americans from different walks of life who borrowed money with terms they didn’t understand and couldn’t afford.

The stories build on our Debt Deception? investigation, begun in February, of how lenders are accused of exploiting gaps in existing laws to make predatory and confusing loans. Here's a brief description of the borrowers we will profile in this installment:

$700 college fee costs family its car

Mildred Morris, a single mother with a federal job in West Virginia, was overjoyed when her high school son won a coveted spot at a famous New York performing arts college to continue his education. But to come up with an unexpected $700 dormitory fee before a college loan was ready, Morris had to put up her fully paid 2002 Pontiac Sunfire as collateral for an auto-title loan. Faced with a 300 percent interest rate, she soon fell behind in her payments and the car – worth several times the amount of the loan – was repossessed.

Small-town shame over credit card bills

A U.S. group of storefront payday lenders is distancing itself from some online payday lenders, saying they want to avoid state regulation by partnering with Native America tribes.

“We abhor their practices,” Steven Schlein, a spokesman for the Consumer Financial Services Association of America (CFSA), a group that represents bricks-and-mortar payday lending stores, told iWatch News.

Lenders that peddle loans online make it difficult for states to regulate them, Schlein said. By contrast, he said, “we make money from customers who walk into our state-regulated stores.”

As iWatch News reported in February, Internet-based lenders have sparked legal fights in California, Colorado and elsewhere by claiming they’re immune from lawsuits and regulation because they are “tribal enterprises” owned and operated by Native American tribes. They say tribal-nation sovereignty allows them to operate outside state oversight — even though they’re making loans to non-Native Americans living far from Indian lands.

State regulators and consumer lawyers complain, in turn, that the tribes are being used as fronts for the lenders. The lender-tribe relationships, these detractors say, are ploys designed to allow the lenders to skirt consumer-lending laws.