Office of Servicemember Affairs Annual Report 2022

CONSUMER FINANCIAL PROTECTION BUREAU | JUNE 2023

Office of Servicemember

Affairs Annual Report

January

– December 2022

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Table of contents

Table of contents.................................................................................................................2

Executive Summary ............................................................................................................3

1. Introduction .....................................................................................................................6

1.1 Credit or consumer reporting ............................................................................ 9

1.2 Debt collection ............................................................................................... 10

1.3 Checking or savings accounts........................................................................... 11

1.4 Credit cards.....................................................................................................12

1.5 Money transfer, money services, and virtual currencies ....................................13

2. Growth of payment apps in the marketplace and the servicemember

community ..................................................................................................................15

2.1 Payment apps in the marketplace .................................................................... 15

2.2 Payment apps in the servicemember community ............................................. 17

3. Servicemembers face unique risks with payment apps ...............................................19

3.1 Frequent relocations put servicemembers and their families at higher risk of scams

and fraud ................................................................................................... 20

3.2 Servicemembers face higher risks of identity theft .......................................... 22

3.3 Issues with payment apps can cause negative impacts on a servicemember’s

financial well-being .................................................................................... 24

3.4 Servicemembers report difficulties getting issues resolved through payment app

companies .................................................................................................. 26

3.5 Other payment app risks ................................................................................ 28

Recommendations ............................................................................................................30

Appendix A: 2022 Servicemember Complaints ................................................................31

Appendix B: 2022 CFPB military financial protections by the numbers..........................36

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Executive Summary

The Consumer Financial Protection Bureau’s (CFPB) Office of Servicemember Affairs (OSA) was

created by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank

Act).

This report analyzes the complaints submitted by servicemembers, veterans, and their

families in 2022. In 2022 alone, over 66,400 servicemember complaints were submitted a 55%

increase compared to 2021, and a 62% increase compared to 2020.

Section 2 discusses the growth of popular payment apps,

sometimes described as P2P payment

platforms, in the marketplace and in the servicemembers community. The report finds that

servicemember complaints about payment apps grew from roughly 600 in 2020 to approximately

800 in 2021 and continued to rise to over 1,100 complaints in 2022.

Many of the reported issues

and complaints relate to fraud and scams, suggesting it’s a rapidly growing issue within this

community.

Section 3 discusses the unique risks servicemembers face from the potential abuse of these

payment app services. The report highlights some of the major issues the CFPB identified based

on 2022 servicemember complaints about payment apps, and the steps industry can take to

address them.

Here are some of our key findings on the unique risks and challenges for servicemembers in using

payment apps:

 Servicemembers submit complaints related to payment apps at a higher

percentage than the general population. In 2022, servicemembers submitted more

than 1,100 payment app complaints, one of the fastest-growing complaint types submitted

to the CFPB.

 Members of the military are more susceptible to identity theft, which can

heighten the risk of unauthorized access to their payment app accounts. In

2022, active duty servicemembers reported almost 38,000 cases of identity theft to the

Federal Trade Commission (FTC).

A steady income may make servicemembers a target

Pub. L. No. 111-203 (2010), 124 Stat. 1376.

Payment app service includes non-bank, b ank, and cre di t union p roviders.

Payment app complaints are defined as checking or savings, prepaid card, credit card, or money transfer or service,

vi rtu al currency complaints mentioning "Paypal" OR "Ze l le" OR "Venmo" OR "CashApp" OR "Cash App"

Fed. Trade Comm’n, Military Consumer Identity Theft (April 25, 2023),

https://public.tableau.com/app/profile/federal.trade.commission/viz/IdentityTheftReports/MilitaryIDTheft

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for scammers looking to tap into bank accounts that are often linked to a payment app.

The CFPB has received complaints where servicemembers had their identities stolen and

then experienced unauthorized money transfers out of their payment app accounts.

 Servicemembers report serious financial harm from scams and fraud when

using payment apps. Often during a permanent change of duty station, servicemembers

face the need to secure housing, a new automobile, or daycare during a short window,

which often requires them to conduct more online transactions. Servicemembers and their

families reported that being scammed online using payment apps can result in serious

issues – jeopardized housing, lost life savings, cascading financial distress, emotional

distress, and embarrassment.

 Complaints suggest that the companies and financial institutions that provide

payment apps often fail to provide timely and substantive resolutions to

servicemembers. In the complaints submitted to CFPB, even when they have a path to

recovering lost money, servicemembers stated that they had trouble getting in contact with

a customer representative. When they did get in contact, the resolution process was

tedious and slow, and coordination with multiple parties was challenging and often failed

to address their concerns. Failure to address these concerns in a timely and effective

manner can cause additional stress and anxiety for servicemembers, impacting their

financial well-being and readiness to carry out their duties.

As the CFPB considers steps to ensure payments are safe and secure, payment app companies can

undertake the following recommendations to better align with the expectations of servicemembers

and their families:

 Payment app providers can improve the safety and security of their networks

to prevent fraud. Servicemembers face unique scenarios where they need to send

money quickly in order to facilitate a change in duty stations or other service-related

needs. Payment app providers can improve the overall safety and security of their products

by preventing, identifying, and limiting fraudulent activity, including by removing repeat

fraudsters from their system and adopting tools to mitigate fraud during account opening.

Where appropriate, they should invest in technology and tools to improve the safety and

security of their networks.

 Payment app providers can improve their responsiveness in the event fraud

does occur. As a baseline matter, payment app providers are bank and non-bank

financial institutions subject to Regulation E, and they must comply in accordance with the

Regulation E procedures and timeframes for resolving errors. Where fraud involves

multiple entities (e.g., non-bank payment apps and banks sending and receiving customer

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funds), all parties can coordinate more closely to ensure that problems related to fraud are

resolved quickly. By working closely to expedite the process, payment app providers can

help reduce the time servicemember are unable to access lost funds. Rapid resolution of

these issues can be critical during a permanent change of station and deployments.

 Payment app providers should tailor reimbursement policies to better

recognize the experiences of servicemembers. Servicemembers, like all

consumers, can face difficulties when experiencing fraud on payment app

providers. Payment apps should recognize these challenges and take a comprehensive

approach to reimbursement when all types of fraud occur.

Appendix A of the report examines in-depth complaint data and analysis from active duty

servicemembers, veterans, and their families.

Finally, Appendix B describes the actions the CFPB has taken and the results that it has achieved

to protect the military community from financial harm. This includes efforts to educate and

empower servicemembers, enforce military financial protections, and collaborate with federal,

state, and non-government stakeholders to advance military financial well-being.

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1. Introduction

The CFPB began accepting consumer complaints in July 2011.

Since then, servicemembers,

veterans, and their families (collectively servicemembers, for the purposes of this report) have

submitted more than 323,000 complaints (Figure 1).

In 2022 alone, servicemembers submitted

more than 66,400 complaints—a 55% increase compared to 2021, and a 63% increase compared

to 2020.

FIGURE 1: TOTAL COMPLAINT S PER YEAR SUBMITTED BY SERVICEMEMBER S FROM 2011 - 2022

Servicemembers are expected to keep their finances in order at every step of their military career.

The CFPB aims to ensure that servicemembers can handle a wide range of challenging financial

situations effectively, and we use the complaint process as a way to gather information about the

Consumer complaints are submissions that express dissatisfaction with, or communicate suspicion of wrongful

conduct by, an identifiable entity related to a consumer’s personal experience with a financial product or service. See

generally Consumer Fin. Prot. Bureau, Consumer Response Annual Report (Mar. 2023),

https://www.consumerfinance.gov/data-research/research-reports/2022-consumer-response -annual-rep ort/

Complaint data in this Section 1 of this report are current as of May 1, 2023. This report excludes some complaints

that the CFPB received, including multiple complaints submitted by a given consumer on the same issue (i.e.,

duplicates), whistleblower tips, and complaints that the CFPB found were submitted without the consumer’s

authorization. Complaint numbers are rounded throughout the report; therefore, numbers and percentages may not

sum to sub-totals or 100%.

The CFPB expanded its complaint handling and public Consumer Complaint Database over several years. See

generally Consumer Fin. Prot. Bureau, Consumer Complaint Database Release Notes,

https://cfpb.github.io/api/ccdb/release-note s.html

for information on when specific products/services were added to

the Database.

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issues they face, both domestically and abroad. By monitoring these complaints, the CFPB can

hold companies accountable for their actions and fulfill its legal obligations.

As in prior years, credit reporting remains the top concern among servicemembers, followed by

debt collection and credit cards. The percentage of complaints filed by servicemembers exceeded

the percentage filed by all consumers for debt collection, credit cards, checking and savings

accounts, mortgages, money transfer services and virtual currency, and vehicle loans and

lease. Notably, among servicemembers, 6% of complaints were related to mortgages and 2% were

related to vehicle loan or lease, compared to 2% and 1%, respectively, for all consumers (Figure 2).

FIGURE 2: SERVICEMEM BE R VS ALL CONSUMER S COMPLAINTS BY PRODUCT IN 2022

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The CFPB received servicemember complaints from across the United States and from those

stationed overseas (Figure 3). States with the highest rate of servicemember complaints on a per

capita basis are Georgia (547), South Carolina (453), Nevada (390), Delaware (351), and Virginia

(343). States with the lowest rate of servicemember complaints include Iowa (63), Massachusetts

(69), West Virginia (71), Nebraska (76), and Utah (77).

FIGURE 3: COMPLAINT SUBMISSION S BY SERVICEM EMBER S PER 1M PEOPLE

The CFPB received 145 complaints from Puerto Rico and more than 300 complaints from servicemembers

living abroad or in other U.S. territories in 2022. For a full detailed breakdown of complaints by

geographic location see Appendix A: Fi gu re 15.

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In 2022, the CFPB sent complaints to more than 3,200 companies for their review and response.

Companies are expected to review the information provided in the complaint, communicate with

the consumer as needed, determine what action to take in response, and provide a written

response to the CFPB and the consumer. When a company cannot take action on a complaint,

they can provide an administrative response that includes a statement or other evidence

supporting this response (Figure 4).

FIGURE 4: COMPANY RESPONSE TO SERVICEMEM BER COMPLAINTS IN 2022

1.1 Credit or consumer reporting

In 2022, the CFPB received approximately 869,000 credit or consumer reporting complaints from

all consumers. Servicemembers submitted approximately 35,900 of those credit or consumer

reporting complaints in 2022. The CFPB sent approximately 31,400 (or 87%) of these complaints

to companies for review and response, referred 2% to other regulatory agencies, and found 10% to

be not actionable.

As of May 1, 2023, there were no credit or consumer reporting complaints

pending with the consumer and with the CFPB.

Complaints that are referred to other agencies include complaints about depository institutions with $10 billion or less

in assets or non-depositories that do not offer a consumer financial product or service. Complaints that are not

actionable are not sent to the company for a response or referred to other agencies; these complaints include incomplete

submissions, withdrawn complaints, and complaints in which the CFPB discontinued processing because it had reason

to believe that a submitter did not disclose its involvement in the complaint process.

Financial Product or

Service

Closed

with

monetary

relief

Closed

with non-

monetary

relief

Closed with

explanation

Admin

response

Company

reviewing

Company

did not

provide a

timely

response

Credit or consumer

reporting

<1% 33.6% 64.7% 1.2% 0% <1%

Debt collection <1% 11% 83.5% 1.5% 0% 3.3%

Checking or

savings

13.4% 5.8% 77.6% 2.2% 0%

1.2%

Credit card 17.2% 12.8% 65.6% 3.4% 0% 1.0%

Money tr ansfe r or

service, virtual

currency

10.2% 5.4% 81.9% 1.1% 0% 1.3%

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Companies responded to 99.7% of credit or consumer reporting complaints sent to them for

review and response. They closed 65% with an explanation, 34% with non-monetary relief, and

0.2% with monetary relief. They provided an administrative response for 1% of complaints. They

did not provide a timely response for 0.3% of complaints. (Figure 5).

FIGURE 5: COMPANY RESPONSES TO CREDIT REPORTING COMPLAINT S BY ISSUE

1.2 Debt collection

The CFPB received approximately 9,800 debt collection complaints from servicemembers in

2022. We sent approximately 5,400 (or 55%) of these complaints to companies for review and

response, referred 35% to other regulatory agencies, and found 10% to be not actionable. As of

May 1, 2023, no debt collection complaints were pending with the consumer, and none were

pending with the CFPB. Roughly 31% of debt collection complaints were referred to the FTC.

Debt collection companies responded to 96.7% of complaints sent to them for review and

response. These companies closed 83% with an explanation, 11% with non-monetary relief, and

0.8% with monetary relief. They also provided an administrative response for 1%. Companies did

not provide a timely response for 3% of complaints.

In 87% of debt collection complaints with closure responses in 2022, consumers reported that

they attempted to resolve their issue with the company before submitting a complaint to the

CFPB. Servicemembers submitted over 9,800 complaints about debt collection—more than in any

prior year. “Attempts to collect debts not owed” accounted for over 50% of debt collection

complaints with closure responses in 2022 (Figure 6).

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Servicemembers accounted for 8.9% of debt collection complaints with closure responses,

compared to 11.2% of complaints about debt collectors making false threats or representations

and debt collectors threatening legal action (10.7%). Since its inception, the Office of

Servicemember Affairs has actively engaged in educational efforts to ensure servicemembers know

their rights regarding debt collectors threatening them with legal action, impacts to their security

clearances, or calls to their chains of command.

FIGURE 6: COMPANY RESPONSES TO DEBT COLLECTION COMPLAINT S BY ISSUE

1.3 Checking or savings accounts

The CFPB received approximately 4,800 checking or savings servicemember complaints in 2022,

a 47% increase from the previous year. We sent approximately 3,600 (or 76%) of these complaints

to companies for review and response, referred 15% to other regulatory agencies, and found 9% to

be not actionable. As of May 1, 2023, no checking or savings complaints were pending with the

consumer, and none were pending with the CFPB.

Consumer Fin. Prot. Bureau, Servicemembers: Know your rights when a debt collector calls (Sept. 2016),

https://files.consumerfinance.gov/f/CFPB-Servicemembers-Know-Your-Ri gh ts-Handout-Debt-Collection.pdf

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Companies responded to 98.8% of checking or savings complaints sent to them for review and

response. They closed 78% with an explanation, 13% with monetary relief, and 6% with non-

monetary relief (Figure 7). These companies provided an administrative response for 2% of

complaints. They did not provide a timely response for 1% of complaints.

In 95% of checking or savings complaints with closure responses in 2022, consumers reported

that they attempted to resolve their issue with the company before submitting a complaint to the

CFPB.

FIGURE 7: COMPANY RESPONSES TO CHECKING OR SAVINGS ACCOUNT COMPLAINTS BY ISSUE

1.4 Credit cards

In 2022, servicemember complaints about credit cards increased 45% compared to 2021, from

approximately 3,400 to 5,000 complaints. The CFPB sent approximately 3,700 (or 74.8%) to

companies for review and response, referred 19% to other regulatory agencies, and found 6% to be

not actionable. As of May 1, 2023, no credit card complaints were pending with the consumer, and

none were pending with the CFPB.

Credit card companies responded to 99% of complaints sent to them for review and response.

They closed 66% with an explanation, 17% with monetary relief, and 13% with non-monetary

relief. These companies provided an administrative response for 3% of complaints (Figure 8). The

companies did not provide a timely response for 1% of complaints.

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In 94% of credit card complaints with closure responses in 2022, consumers reported that they

attempted to resolve their issue with the company before submitting a complaint to the CFPB. The

most frequently mentioned issue was “problems with a purchase shown on your statement,”

which increased 33% over 2021 and 26% over 2020.

FIGURE 8: COMPANY RESPONSES TO CREDIT CARD COMPLAINT S BY ISSUE

1.5 Money transfer, money services, and

virtual currencies

In 2022, the CFPB received approximately 2,100 complaints from servicemembers about money

transfers or services and virtual currencies. The CFPB sent approximately 1,200 (or 58.6%) of

these complaints to companies for review and response, referred 29% to other regulatory

agencies, and found 12% to be not actionable. As of May 1, 2023, no complaints were pending with

the consumer, and none were pending with the CFPB.

Companies responded to 98.7% of money transfer or service, virtual currency complaints sent to

them for review and response. Companies closed 82% of complaints with an explanation, 10%

with monetary relief, and 5% with non-monetary relief. Companies provided an administrative

response for 1% of complaints (Figure 9). Companies did not provide a timely response for 1% of

complaints.

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In 95% of money transfer or service, virtual currency complaints with closure responses in 2022,

consumers reported that they attempted to resolve their issue with the company before submitting

a complaint to the CFPB.

FIGURE 9: COMPANY RESPONSES TO MONEY TRANSFER, MONEY SERVICES, AND VIRTUAL

CURRENCY COMPLAINT S BY ISSUE

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2. Growth of payment apps in

the marketplace and the

servicemember community

2.1 Payment apps in the marketplace

Payment apps allow a consumer to send money to another person without needing to write a

check, swipe a physical card, or exchange cash. Depending on the provider, a payment app

transfer can be initiated from a consumer’s online bank account portal, prepaid account portal, or

mobile application. The onset of the COVID-19 pandemic in the spring of 2020 led to a significant

increase in the adoption and usage of payment apps (both bank and non-bank). According to an

analysis of data collected in the 2019 and 2020 Federal Reserve payment study, in early 2020, the

number of accounts with first-time payment app activity surged by almost 18% from the first

quarter to the second quarter of 2020; growth in the number of accounts with activity similarly

rose at a high rate of 12.4% over the same period.

The Federal Reserve’s 2021 annual Diary of Consumer Payment Choice found that 66.4% of all

consumers had adopted one or more payment apps.

A 2022 Pew Research Center survey found

that over three-quarters (76%) of adult consumers in the U.S. have used one of the four large

common payment app providers.

Meanwhile, a 2022 Federal Deposit Insurance Corporation

Board of Governors of the Federal Reserve System (U.S.), Developments in Noncash Payments for 2019 and 2020:

Findings from the Federal Reserve Payments Study,

https://www.federal reserve.gov/paymentsystems/december-

2021-findings-from-the -federal-reserve-payments-study.htm

Kevin Foster, Claire Greene, and Joanna Stavins, 2022, The 2021 Survey and Diary of Consumer Payment Choice:

Summary Results. Federal Reserve Bank of Atlanta Research Department Data Report, no. 22-2,

https://www.atlantafed.org/-/media/documents/banking/consumer-payments/survey-diary-consumer-payment-

choice/2021/sdcpc_2021_report.pdf

Monica Anderson, Pew Research Center, Payment apps like Venmo and CashApp bring convenience – and security

concerns – to some users (2022),

https://www.pewresearch.org/fact-tank/2022/09/08/payment-apps-like-venmo-

and-cash-app-bring-convenience-and-security-concerns-to-some-u sers/

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(FDIC) survey found that almost half of all households (46.4%) used a non-bank payment app in

2021.

In the payment app complaints submitted to the CFPB, the most common self-

identified issues are fraud and challenges around dispute resolution.

In 2022, of all the complaints submitted to the CFPB on payment apps sent to companies, the

most common complaints were related to fraud. Other federal agencies have reported similar

growth, particularly between 2018 and 2021. For example, complaints to the FTC about

fraudulent payment apps increased by more than 460% (from 12,476 to 70,175), and associated

financial losses increased by more than 360% from $28.4 million to $130.9 million.

In 2022,

62,137 payment apps-related fraud complaints were submitted to the FTC and total financial

losses increased to $163.4 million.

Additional research using internal banking data has shown

that fraud is a growing problem in this market and one that often leaves the consumer with little

or no recourse.

One common type of fraud is induced fraud – which occurs when a consumer is tricked into

sending money to a fraudster or otherwise unwittingly facilitating a transaction, generally because

the fraudster misrepresents their identity. Unauthorized transfers are also a growing issue seen in

CFPB complaints. This type of transaction can occur when the user’s payment app account is

accessed without their permission and money is transferred out. Sometimes unauthorized

transfers result from a consumer being tricked into providing their login credentials or their

credentials being taken fraudulently.

Fed. Deposit Insurance Corp., 2021 FDIC National Survey of Unbanked and Underbanked Households 4 (2022) 2021

FDIC National Survey of Unbank ed and Underbanked Households

https://www.fdic.gov/analysis/household-

survey/2021report.pdf. This survey described “nonbank online payment services” as those “with an account feature that

allows you to receive and store money in the account.” Examples of nonbank online payment services are PayPal,

Venmo, and Cash App. The survey question instructed households not to consider Zelle, which is a bank-owned P2P

payment service.

Federal Trade Commission. Based on the total number of reports and associated financial losses associated made to

the FTC’s Consumer Sentinel Network where a payment app or service was used to defraud. See

https://www.ftc.gov/news-events/data-visualizati ons

Id.

Office of Senator Elizabeth Warren, Facilitating fraud: How consumers are left high and dry by the banks that

created it, 2 (October 2022), https:/www.warren.senate.gov/download/zelle-report-october-2022

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2.2 Payment apps in the servicemember

community

As the use of payment apps has become more commonplace, servicemember complaints about

these platforms have increased considerably. In 2022, complaints mentioning payment apps

represented 2.2% of total servicemember complaints sent to companies compared to 1.5% for all

consumers (Figure 10).

FIGURE 10: PERCENTAG E OF COMPLAINT S SENT TO COMPANIES ABOUT PAYMENT APPS FOR

SERVICEM EMBERS AND ALL CONSUMER S

Status

Payment app

complaints sent to

companies

Total complaints sent

to companies

Percent of total

complaints

Servicemember 1,118 51,855 2.2%

All consumers 12,389 819,570 1.5%

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In 2022, CFPB sent over 1,100 servicemember complaints mentioning payment apps to

companies, up from about 800 in 2021 and 600 in 2020 and more than in 2013 to 2019 combined

(Figure 11).

FIGURE 11: PAYMENT APP SERVICEM EMBER COMPLAINT S SENT TO COMPANIES BY PRODUCT AND

YEAR

Year

Payment app

Money

Transfer or

service, Virtual

Currency

Payment app

Checking or

savings

Payment

app

Credit

Card

Payment app

Prepaid Card

Total

2022 552 408 118 40 1,118

2021 439 233 88 30 790

2020 357 154 97 28 636

2013 -

2019

434 267 183 35 919

The growth of these platforms has allowed bad actors to find fast and easy ways to trick their

targets into sending money. According to a recent AARP study, servicemembers are nearly 40%

more likely to lose money to scams and fraud than the civilian population, and four out of five

report being targeted by scams directly related to their military service or benefits, resulting in

financial losses of $267 million in 2021.

As more servicemembers use payment apps as a means

of transferring money, they are increasingly experiencing financial loss and harm.

Jennifer Sauer, AARP, Veterans Battle Surprise Attacks from Fraud and Scams (Nov. 9, 2021),

https://www.aarp.org/pri/topics/work-finances-retirement/fraud-consume r-protection/fraud-scams-military-

veterans/

19 CONSUMER FINANCIAL PROTECTION BUREAU

3. Servicemembers face unique

risks with payment apps

Payment apps offer a convenient way to transfer funds, particularly for servicemembers who are

asked to move frequently and need the ability to send and receive money easily and safely online.

CFPB complaints show that servicemembers are relying on payment apps for necessary tasks,

such as making a deposit on an apartment rental at their next duty station, securing a temporary

vehicle for their family during a move, or selling large personal belongings that they cannot bring

with them to a deployed location. These transactions often involve sending money to and

receiving money from people across the country, which may be driving the increase in reported

scams and fraud.

In 2022, over half of the money transfer or service, virtual currency complaints from

servicemembers about these platforms were about fraud or scams (Figure 12). In addition, they

often reported issues with customer service, an inability to getting timely resolutions, and feelings

of anxiety.

FIGURE 12: P2P SERVICEME MBER MONEY TRANSFER OR SERVICE, VIRTUAL CURRENCY

COMPLAINT S SENT TO COMPANIES BY ISSUES, 2022

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3.1 Frequent relocations put servicemembers

and their families at higher risk of scams and

fraud

Servicemembers who are on active duty are frequently obligated to move every few years. During

Permanent Change of Duty Station (PCS) months, they often share their personal and financial

information with moving services, housing managers, and utility companies. In 2022, the OSA

received reports from various stakeholders about the inability to find suitable housing given the

competitive rental housing market. Many servicemembers and their families begin the housing

search online and start looking for suitable homes before their PCS date. They’re often asked to

secure a home by putting down a deposit, without first seeing the property, so that they have a

place to live at their new duty station. This increased dependence on online transactions, though,

puts servicemembers and their families at a higher risk of scams or fraud.

Given the deployment and geographical mobility of servicemembers, securing housing is not the

only transaction that is often started online. CFPB complaints also indicate that payment apps are

being used to send money for deposits on automobiles, childcare, furniture, and even pets. Unlike

the civilian population, who can normally meet face-to-face or physically inspect the goods or

service, servicemembers and their families are often unable to do the same due to their military

duties, especially if they’re deployed overseas.

In addition, scammers are increasingly listing houses for rent that do not exist. These fraudulent

listings often appear legitimate, with detailed descriptions and high-quality photos, leading

unsuspecting individuals to send money for a rental deposit or advance payment. As a result, it

can be easy to fall victim to these scams and lose a significant amount of money when trying to

secure housing.

For instance, one family member of an active duty servicemember shared:

Being in the military, I am usually not afforded the ability to view a location prior to

moving there, meet with landlords personally, or tour homes. Because of this, often we

have to view properties online through applications like [company]. I received an email

and call from the owner letting me know that I had been selected for the property and if I

wanted it, the next step would be to sign the lease and submit the deposit of $1200 and the

first months[sic] rent of $1200. The owner used [payment app service], which I have used

in the past and assumed it was a reliable service…

My landlord said he only got 1/3 payments even though I received receipts from

[company]. When I called [company], they confirmed the money had left my account.

21 CONSUMER FINANCIAL PROTECTION BUREAU

After a week, I asked the landlord if we could have a conference call with him and his bank,

[company], so that I could hear directly from them that they had not received funds. At

that point, he stopped answering my emails, texts, and phone calls. When I attempted to

call him [date], his phone was disconnected. It's evident I have been scammed. Now I'm

out $2400 which is a significant amount of moving, especially before a move and the

holidays.

Another family member of a servicemember in a similar situation overseas who was trying to

secure housing also reported:

My husband is military and we are currently stationed overseas in [location]. My kids and

myself are leaving a few months early (3 weeks) back to the states to get them into school

and get settled before my husband comes home. We were looking for houses and we found

a house at [location] ...

Our application was approved and we were able to continue the process of reserving the

house… He asked us to put down our deposit that was $1400.00 to reserve the house and

that we weren't due to pay the 1st month 's rent until we moved in. So we did … He had us

[payment app service] the money to his wife. … He sent over the lease agreement that we

signed and sent back. A few days later he says that he took everything to his lawyer and

everything was fine but the only thing was his lawyer found tenants who were willing to

pay 4 months of rent plus the deposit. I immediately let him know that we were not going

to be able to put that much down and how $1400.00 was a struggle for us to get. He waits

a few hours to tell us that as long as we can put down the first months[sic] rent he'll hold it

for us since we already put a deposit down. We agreed and instead of paying 1 month in

rent, we decided to pay two (months) since we weren't sure when our BAH would kick in

and we did not want to be struggling to pay rent since PCSing[sic] is enough to begin with.

So we went into my husband's TSP and withdrew the money... Our sponsor goes to see the

house … calls us in a confused panic because there are people living in the home. I then

started to contact him multiple times and he has not responded and has not been active

since that day.

Consumer Complaint, https://www.consumerfinance.gov/data-research/consumer-

complaints/search/detail/6170949.

Consumer Complaint, https://www.consumerfinance.gov/data-research/consumer-

complaints/search/detail/5904586.

22 CONSUMER FINANCIAL PROTECTION BUREAU

3.2 Servicemembers face higher risks of

identity theft

Susceptibility to identity theft can heighten the risk of unauthorized access to a

servicemember’s payment app account. The FTC reported that servicemembers are three

times more likely to report that someone used a debit card or some other electronic means to take

money directly from their bank account.

In 2022, a review of five years' worth of identity theft

data reported to the FTC shows that active duty servicemembers are 76% more likely to report

instances of identity theft, where the perpetrator misused an existing bank or credit card account,

than the general population.

Frequent PCS and servicemember deployments can increase their

vulnerability to such incidents, due to the multiple instances of sharing their and their family's

personal information during this time.

Recently, the CFPB published a report emphasizing the adverse effects of identity theft on the

financial stability of servicemembers, including debts incurred as a result of identity theft and the

presence of invalid debts on credit reports.

Servicemembers have reported that their

information was stolen and then used to access their funds through payment apps. These

incidents typically involve unauthorized transfers of money from the servicemember's account

without their consent. For example, one servicemember stated:

I am a victim of identity theft. On [date] I received a phone call from [number]. I looked up

the number and saw that it was linked to a [bank] website. The person on the phone said he

was calling from the bank's fraud department. He said that there was suspicious activity on

my account and asked if I made a big purchase the day before. He verified my home

address, my phone number, and told me to verify my purchases from the past few weeks. I

said yes to all of them because they were purchases I made. The impersonator then

proceeded to ask me about a purchase worth $6,900 on [date]. I said that I did not make

that purchase. I immediately logged into my online banking and saw that someone had

taken out $6,900 the day before. I did not spend that much, I did not share my card

Emma Fletcher, Federal Trade Commission, Identity theft causing outsized harm to our troops (May 21, 202o),

https://www.ftc.gov/news-events/data-visualizati ons/d ata-spotlight/2020/05/identity-theft-causing-outsized-harm-

our-troops.

Terri Miller, Federal Trade Commission, Military families combat identity theft amid life transitions (July 2022),

https://consumer.ftc.gov/consumer-alerts/2022/07/military-families-combat-identity-theft-ami d-life-transitions

Consumer Fin. Prot. Bureau, Servicemember reports about identity theft are increasing (Jan. 12, 2023),

https://www.consumerfinance.gov/data-research/research-reports/servicemember-reports-about-identity-theft-are-

increasing/.

23 CONSUMER FINANCIAL PROTECTION BUREAU

information with anyone, nor was I notified about that amount being taken out before this

person's call to me.

On [date] I went into the physical bank to confirm that my account was frozen, but I was

told from the associate that my account was still opened. Within those 2 days this person

was continuously taking out money from my checkings [sic] account. I made a claim with

the debit card department, [payment app service] department, and the credit card

department because everything was compromised. This person was able to take a total of

$24,000 from my checkings [sic] and $9,500 through [payment app service].

Many military personnel also reported that after their personal information was stolen, the thieves

use it to gain access to their payment app accounts and/or their linked bank accounts. This then

enables the thieves to send money out of that account, causing significant financial loss to the

servicemembers. One servicemember stated:

I have been the target of 11 unauthorized and fraudulent transactions that completely

drained my checking account. These transactions were placed over a 10 day period through

random amounts that left my checking account with negative money, stealing a total of

$3,500. The perpetrator used my banking/debit card information to open up a [payment

app service] account to process these fraudulent transactions. [Company] did not flag these

highly suspicious and out-of-character activity for my checking account and stated they

“could not find proof of fraud” and closed my dispute.

Servicemembers often describe challenges in detecting these fraudulent transfers in real-time, due

to their military duties. Some explicitly note their confusion as to the circumstances that led to the

scam or fraud (e.g., saying, “I have no idea how” or “I don’t know how” in their narrative.)

Recently, the CFPB published a blog on the challenges some servicemembers may face in getting

the free credit report monitoring they’re entitled to under the law.

This is particularly true when

they are deployed to areas with limited or no cellular reception or in locations where personal

cellular devices are not authorized, making it challenging for them to continuously monitor any

changes in their credit report or money sent from their payment app accounts. In such cases, the

servicemembers typically stated that they only knew the amount of money lost and some limited

Consumer complaint, https://www.consumerfinance.gov/data-research/consumer-

complaints/search/detail/6062185.

Consumer Complaint, https://www.consumerfinance.gov/data-research/consumer-

complaints/search/detail/5154628.

Consumer Fin. Prot. Bureau, Credit reporting companies should do more to ensure that servicemembers receive the

free credit monitoring services they are legally entitled to (Apr. 2023),

https://www.consumerfinance.gov/about-

us/blog/credit-reporting-comp anie s-servicemembers-recei ve -free-credit-monitoring-legally-entitled-to/

24 CONSUMER FINANCIAL PROTECTION BUREAU

information about where it was sent. In some cases, they are only provided with a phone number,

email address, or name associated with the recipient’s payment app account. Additionally,

servicemembers may be too preoccupied with their military duties to constantly check their

payment app or bank accounts in real time when the transaction occurs.

3.3 Issues with payment apps can cause

negative impacts on a servicemember’s

financial well-being

Financial readiness is military readiness. A servicemember who is facing financial losses of

thousands of dollars is not focused on their mission, and a servicemember who loses their security

clearance because of financial troubles may not be able to serve at all.

Recently, the CFPB released a report that found that nearly one in four consumers with some

military service are not financially prepared for a disruption to their main source of income.

When a servicemember is put into a situation that hurts their financial readiness, such as a

substantial loss as the result of fraud, it can ultimately jeopardize their ability to protect our

nation and their main source of income to provide for their families. In their complaints,

servicemembers, veterans, and their families have described the tremendous financial impacts of

fraud-related losses, including lost savings, cascading financial distress, emotional distress, and

embarrassment.

If defrauded through a payment app, servicemembers and their families can lose a

large portion of their savings and their financial security. During a PCS, many

servicemembers and their families already experience high out-of-pocket expenses. A 2022 survey

of over 2,000 military families found that the ability to locate housing within their maximum

housing allowance was extremely difficult and the average military family had out-of-pocket costs

of around $2,032 during a PCS.

One complaint below stated the dire impact of losing thousands

by using a payment app during a PCS to secure housing in a competitive rental market:

Office of Research, Consumer Fin. Prot. Bureau, Making Ends Meet in 2022: Insights from the CFPB Making Ends

Meet survey 18 (Dec. 2022),

https://www.consumerfinance.gov/data-research/research-reports/insights-from-

making-ends-meet-survey-2022/.

Blue Star Families and Wells Fargo, Pulse Check 3 (Sept. 2022), https://bluestarfam.org/wp-

content/uploads/2022/10/BSF_PulseCheck_Report_Sep2022.pdf.

25 CONSUMER FINANCIAL PROTECTION BUREAU

The kids and I leave in 3 weeks and we have no home, no savings, and no money to figure

this out. We are at a complete loss... I still cannot fathom that we are out of $4400 with no

place to live.

Once a servicemember reports fraud with their payment app payment accounts,

they may experience unexpected consequences, such as having their funds withheld

and accounts closed or frozen without prior notice. Servicemembers may have their

accounts indefinitely suspended or closed without warning when there is a dispute of

unauthorized charges or an open investigation of their account. As a result, some may find their

accounts suspended indefinitely, leaving them in a state of uncertainty. When accounts are closed,

users may be unable to further escalate the issue or contact customer service since they are

technically no longer customers. This can have a significant impact on their daily lives as they are

unable to access their funds. For example, one veteran reported:

I had a hacking incident [in 2022], in which my personal checking (through [payment app

service]), my [payment app service], and [payment app service] accounts were affected. My

[payment app service] and [payment app service] returned the stolen funds to me fairly

quickly. I did not actually lose any money through [payment app service], the hackers used

my [payment app service] account to move their money through to other people, like a

conduit. But in the eyes of [company], the money went though [sic] my account-- so I owe

it…

… During this whole process, they have locked my account, and all of my apps. I have a

small business and a [company] phone, so the only way I can have and use apps in my

phone is through the [company] and [payment app service]. But with the account being

locked, it has affected my business, because my phone & business apps are affected.

Fraud that leads to a negative balance on a payment app service account can lead to

improper debt collection. The CFPB have also received complaints from servicemembers who

realized the fraudulent transaction and notified their bank to block or stop the transaction only to

be faced with a debt collection action. This often occurred because their payment app account

showed a negative balance, and they were unable to access the account to address the issue or

speak to a customer service representative. For example, in the complaint below, a

Consumer Complaint 220822-9270675, https://www.consumerfinance.gov/data-research/consumer-

complaints/search/detail/5904586.

Consumer Complaint 221111-9745222, https://www.consumerfinance.gov/data-research/consumer-

complaints/search/detail/6190058.

26 CONSUMER FINANCIAL PROTECTION BUREAU

servicemember’s account was left with a negative balance after a fraud incident, and they ended

up paying the money just to avoid debt collection.

Later I closed my [payment app service] account thinking that we had stopped the scam.

[payment app service] emailed me today threatening collections. Because of this threat I

will just pay the scammed money, worried that it would affect my credit. I wanted to

provide this information to you as it seems unfair to consumers that [payment app service]

can do this.

While payment apps can be a valuable tool in a growing online marketplace, the increasing level of

fraud and scams are clearly resulting in financial losses and wasted time for servicemembers,

veterans, and military families.

3.4 Servicemembers report difficulties getting

issues resolved through payment app

companies

Servicemembers who believe they have been the target of scams or fraud can take several actions

to seek a resolution. First, they may file a dispute with the company that processed the payment

transaction. This is often done through the payment app platform or their financial institution

that offers payment apps. Second, they can submit a complaint to the CFPB. Many

servicemembers also described reaching out to other entities for assistance, such as law

enforcement, the Better Business Bureau, the FTC, and credit reporting companies.

Servicemembers report confusion or surprise that their bank’s advertised payment

app didn’t protect them from all scams or fraud. One servicemember described the

confusion they faced after being persuaded to send money to a scammer through the payment app

provided by their bank. They assumed the app would have the same protections as their other

banking accounts:

Since my bank, [bank], offered [payment app service] and promoted it as an option for

sending money, I assumed my bank provided the same protections as they did for

fraudulent transactions from my checking, savings, debit card and credit card accounts. I

am a victim of fraud and I feel like the bank should refund my money since the [payment

Consumer complaint 221021-9619665, https://www.consumerfinance.gov/data-research/consumer-

complaints/search/detail/6113294.

27 CONSUMER FINANCIAL PROTECTION BUREAU

app service] service they provided offers no options for getting the money back from the

scammers no matter how soon you report the fraud.

The consumer was only able to recover the lost money after submitting a complaint with the

CFPB. The payment app service stated that the initial denial was correct but agreed to issue a

refund as a one-time courtesy.

When it comes to induced fraud, servicemembers wait long periods and often see no

monetary relief. Complaints suggest that payment app users are struggling to recover funds

from either their bank or payment app provider, especially when the dispute is the result of

induced fraud. After being defrauded out of their money by a scammer using a payment app

service, servicemember complaints often describe ongoing difficulty in getting timely, substantive,

or any monetary relief from payment app service providers or their financial institutions. One

servicemember stated in their complaint:

One is the overwhelming challenge it has been (6 weeks and counting, as of today) to get

[company] to fairly and transparently review my case, with all of the proof I provided. The[y]

have denied the case repeatedly, although never letting me speak to anyone of authority,

everything has[sic] behind the scenes in the "escalation dept", and only 200 characters of

information can be provided on your own behalf in writing. That’s it.

In other complaints to the CFPB, many servicemembers have described their frustration when

trying to get answers after being scammed or defrauded. For example, one complaint stated:

We have made multiple reports including with [payment app service] however unlike

everyone else [payment app service] was absolutely no help and refused to even attempt to

find out a way to help. It was almost as if I was another customer of theirs who got caught

up in the unfortunate world of fraud. It was as though they had no empathy… that some

people in the world are so nonchalant about others mistakes and heartache.

Servicemembers often complained that they were required to jump back and forth between parties

or deal with long waiting periods to discuss or resolve their concerns. Some servicemembers also

listed additional steps they took or planned to take to resolve their problem, including confronting

scammers directly or reaching out to media outlets. Unfortunately, servicemembers that were the

Consumer complaint, https://www.consumerfinance.gov/data-research/consumer-

complaints/search/detail/5992427.

Consumer Complaint, https://www.consumerfinance.gov/data-research/consumer-

complaints/search/detail/6190058.

Consumer Complaint, https://www.consumerfinance.gov/data-research/consumer-

complaints/search/detail/5904586.

28 CONSUMER FINANCIAL PROTECTION BUREAU

targets of induced fraud were often not able to get any monetary relief from the payment app that

was used.

Even with protections in place, servicemembers are still struggling to get relief. Even

though consumer liability protections clearly cover certain transactions

, complaints indicate that

servicemembers and veterans who lost money due to unauthorized transfers are still struggling to

get their money back during the dispute resolution process. If the claim is timely filed, the

company is required to investigate it and determine if an error occurred that requires the

company to reimburse the user within certain timeframes.

The slow response time and lack of support from the payment app provider can cause

servicemembers, veterans, and their families to miss payments or incur late fees, leading to

additional financial hardship. In most of the complaints about fraud and scams with a payment

app provider, the servicemembers described being frustrated with the process and the lack of

recovery options especially when the product was marketed to them as safe. All these issues can

result in serious financial consequences that can jeopardize not just their financial health but also

their ability to continue service or keep a security clearance.

3.5 Other payment app risks

Finally, servicemembers who keep money in payment app applications may not have

the same protections as traditional deposit accounts. It is important to note that funds

stored in payment apps may not be insured by the FDIC, National Credit Union Administration

(NCUA), or other insurers.

Recently the CFPB published an issue paper highlighting the risks to

consumers if they choose to leave a balance on certain payment app platforms.

In traditional

banking institutions, depositors have a certain amount of protection with FDIC and NCUA

insurance. Depositors will not lose money on their insured funds, up to $250,000, if their

12 CFR § 1005.6. See also Consumer Fin. Prot. Bureau, Electronic Fund Transfer FAQs,

www.consumerfinance.gov/compliance/compliance-resources/deposit-accounts-resources/electronic-fund-

transfers/electronic-fund -transfers-faqs/

Federal Deposit Insurance Corporation, FDIC Consumer News: Is Digital Banking for Me? FDIC Consumer News

(April 2020), https://www.fdic.gov/consumers/consumer/news/april2020.html

Office of Competition and Innovation and Office of Markets, Consumer Fin. Prot. Bureau, Analysis of Deposit

Insurance Coverage on Funds Stored Through Payment Apps (June 2023),

https://www.consumerfinance.gov/data-

research/research-reports/issue-sp otlight-anal ysis-of-deposit-insurance -coverage-on-fu nds-stored-through-payme nt-

apps/full-report/

29 CONSUMER FINANCIAL PROTECTION BUREAU

institution fails.

However, storing funds in a payment app does not have the same type of

security. Payment app providers have become part of the payment ecosystem used every day by

servicemembers, but many may not know that their funds are not protected. If any of these

companies were to fail, servicemembers who keep money in these services might lose their funds

or have delayed access to any recovered funds. The OSA is closely analyzing this situation to assess

the unique risks to servicemembers, veterans, and their families.

See https://www.fdic.gov/resources/deposit-insurance/faq/ and an overview of the similar insurance framework

administered by the National Credit Union Association at https://ncua.gov/support-services/share-insurance-fund.

30 CONSUMER FINANCIAL PROTECTION BUREAU

Recommendations

 Payment app providers can improve the safety and security of their networks

to prevent fraud. As discussed above, servicemembers face unique scenarios where they

need to send money quickly in order to facilitate a change in duty stations or other service-

related needs. Payment app providers can improve the overall safety and security of their

products by preventing, identifying, and limiting fraudulent activity, including by

removing repeat fraudsters from their system and adopting tools to mitigate fraud at

account opening. Where appropriate, they should invest in technology and tools to

improve the safety and security of their networks.

• Payment app providers can improve their responsiveness in the event fraud

does occur. As a baseline matter, payment app providers are bank and non-bank

financial institutions subject to Regulation E, and accordingly must comply with the

Regulation E procedures and timeframes for resolving errors. Where fraud involves

multiple entities (e.g., nonbank payment apps and banks sending and receiving customer

funds), all parties can coordinate more closely to ensure that problems related to fraud are

resolved quickly. By working closely to expedite the process, payment app providers can

help reduce the time that the servicemember cannot access lost funds. Rapid resolution of

these issues is critical during a PCS and deployments.

• Payment app providers should tailor reimbursement policies to better

recognize the experiences of servicemembers. Servicemembers, like all consumers,

can face difficulties when experiencing fraud on payment app providers. Payment apps

should recognize these challenges and take a comprehensive approach to reimbursement

when all types of fraud occur.

31 CONSUMER FINANCIAL PROTECTION BUREAU

Appendix A: 2022

Servicemember Complaints

FIGURE 13: COMPLAINT S BY YEAR AND MILITARY STATUS

Year

Active-Duty

(including family)

National Guard

and Reserve

Veteran and Retired

(including family)

Total Service-

member

2022

6,109

2,624

38,611

66,398

2021

3,230

1,709

25,356

42,747

2020

3,353

1,512

23,806

40,826

2019

3,790

1,529

20,552

35,964

2018

3,035

1,565

20,314

35,033

2017

2,758

1,601

18,672

31,244

2016

2,113

1,365

12,422

20,913

2015

1,808

1,242

11,699

19,505

2014

1,672

1,152

10,602

17,396

2013

1,034

576

5,431

8,942

Total

29,378

15,165

188,843

323,062

This total servicemember complaint count includes those who submitted complaints but did not provide an affiliation

status.

32 CONSUMER FINANCIAL PROTECTION BUREAU

FIGURE 14: 2022 COMPLAINTS BY 5 LARGEST PRODUCTS AND YEAR OVER YEAR CHANGES

Product

Active-Duty

(including

family)

Change

from Prior

Year

National

Guard and

Reserve

Change from

Prior Year

Veteran and

Retired

(including

family)

Change

from Prior

Year

Credit or

consumer

reporting

4,212 129% 1,559 97% 21,015 110%

Debt Collection 584 11% 331 -3% 5,583 7%

Mortgage 154 -11% 138 3% 2,872 -8%

Credit Cards 246 61% 149 43% 2,734 41%

Checking or

Savings

285 85% 183 33% 2,889 41%

All other