House members voiced anger Thursday at pressure put on military recruits to buy what they said were overpriced, unsuitable mutual funds and life insurance. Lawmakers lined up behind bipartisan legislation aimed at curbing such marketing to soldiers, many of whom are being sent to war zones.
At a time when soldiers are fighting and dying in Iraq, lawmakers denounced widespread instances of financial companies targeting military personnel with what lawmakers called high-pressure sales tactics and charging them exorbitant commissions.
‘Just sign here, son’
There are reports of some companies using retired military officers to make sales pitches to recruits for mutual funds with commissions that take 50 percent of the investor’s contributions in the first year.
“Just sign here, son,” the retired officers are urging young soldiers in the “desperate hours” before they ship off to combat duty, Rep. Richard Baker, R-La., chairman of a House Financial Services subcommittee, said at a hearing.
Fund plans with 50 percent commissions disappeared from the civilian market in the 1970s and now are nearly exclusively sold to military personnel, industry experts say.
Legislation proposed this week by Rep. Max Burns, R-Ga., would prohibit all sales of the contractual mutual fund plans. The bill also would expand the authority of state regulators over sales of insurance policies on military bases.
With a number of supporters from both parties, the bill’s prospects for passage appear strong in the waning days of Congress’ session.
Baker said it was impossible for lawmakers to “stand by and not take corrective action.”
Rep. Michael Oxley, R-Ohio, chairman of the full committee, called it “a systemic problem that needs to be fixed.”
He cited reports of groups of recruits being “marched into compulsory briefings on veterans’ benefits by salesmen pretending to be financial planners (who) quickstep them into signing up for what turns out to be long-term life insurance.”
The briefings are organized under the Pentagon’s policy of having financial management classes for personnel on bases.
Some young soldiers without dependents are paying more than $100 a month for life insurance on top of relatively inexpensive policies they already have as members of the military.
Rep. Steve Israel, D-N.Y., told of his 19-year-old Long Island constituent, Raheen Tyson Heighter, who enlisted in the Army and served in Iraq:
“He was told he needs life insurance and he figured, ‘I’m 19 years old; I don’t really need life insurance.’ He was told again, ‘Well, you need to have it.’ He replies, ‘What’s the cheapest policy I can get?’ and they tell him a $10,000 policy. He gets a $10,000 policy.”
After he was killed in action in Iraq, Israel related, Heighter’s mother got a phone call from an Army officer saying, “All your son bought was a $10,000 policy. We’re sorry.”
Heighter had been unable to afford the $20 a month for the standard military policy, which provides for $200,000 in coverage.
Israel is proposing a separate bill that would provide for $250,000 at no cost to service members by increasing their paychecks to cover the premiums.
An official of American Amicable Life Insurance Co. told the hearing that after improper sales practices by several of its agents at Fort Benning, Ga., and Camp Pendleton, Calif., came to light, the company fired the agents and gave refunds to affected policyholders.