ARLINGTON, Va. — Fed up with a system that he says scams young, unassuming servicemembers, Rep. Max Burns (R–Ga.) introduced a bill Tuesday to ban the sale of “questionable financial products,” such as some types of insurance and mutual funds, on military bases.

“It is an outrage that financial products that were found so disreputable that they disappeared from the civilian market 20 years ago have continued to survive on-post, by being pawned off on unsuspecting young service people as part of ‘approved’ savings and insurance plans,” Burns said in a statement.

“In addition, we have far too many unscrupulous insurance companies using federal military property to dodge state insurance commissioners and sell overpriced policies, with virtually no oversight. We cannot allow those who defend our freedom to continue to be unfairly targeted for the sale of dubious financial products.”

If passed, the Military Personnel Financial Services Protection Act would change federal securities laws to ban the sale of contractual mutual funds that cost participants up to half of their first-year contributions, and for products that young troops cannot afford or don’t need, such as redundant life insurance, Burns said.

It also clarifies that insurance sales representatives operating in the United States are subject to state insurance commission regulations and laws, even if the products are sold on federal land.

But how the law might apply to insurance sales at overseas bases has yet to be determined.

“We don’t know how to plug that hole just yet,” said John Stone, Burns’ press secretary. “We’re looking for good suggestions from the committee.”

The bill, introduced Tuesday, is scheduled for a Thursday hearing before the House Financial Services Committee.

Paul Cozby, a spokesman for First Command Financial Planning Inc. in Texas, told The New York Times last week that the company would support and comply with any changes Congress decided to make in the law governing contractual plans.

“In fact, we have discussed with Mr. Burns some of these changes and have offered ideas for industry improvements,” Cozby said in the newspaper’s report.

Georgia’s chief insurance regulator, John Oxendine, has taken the lead of state commissioners investigating product sales to troops. He is working with Judge Advocate General officials at military bases in Georgia who will help in getting documents and statements from soldiers who might have been duped, he said.

Investigators also are looking for troops in Iraq and Afghanistan who might have bought insurance products as safeguards before deploying to combat zones, he said.

“The allegation is that in some cases … soldiers were sold unlicensed products,” Oxendine said in an interview. “Another allegation is that many products, even though licensed, were sold using misleading or improper sales tactics. The advertising was misleading, or implied government involvement or approval, was confusing about what the product was, as in the soldier thought he was buying one thing but actually was buying something else.”

“The agent has a fiduciary duty to be honest and clearly inform what you are buying and we’re alleging in some cases, they were not.”

Though still very early in the process, there is a chance that, if sales are proved fraudulent, servicemembers might be able to recoup lost money, Oxendine said.

Troops need to contact state insurance commissioners in the state in which the products were bought, he recommended. If products were purchased overseas, Oxendine suggests servicemembers begin the process by contacting insurance commissioners in their home state and their respective service inspector generals.

However, claims could take years to recoup, if at all, since not all states have launched formal criminal investigations.

The Government Accountability Office, Congress’ investigative arm, is designing a study of military insurance sales to look at the process that the installations use to process allotments for insurance polices, how closely installations adhere to Defense Department regulations on the sale of insurance, and whether insurance companies are complying with the laws, said Derek Stewart, director for military and DOD civilian personnel issues.

At Congress’ behest, the GAO started looking into the issue after insurance companies complained to lawmakers that they were being treated unfairly, Stewart said. “The genesis of the study wasn’t that soldiers were complaining at all, it was just the reverse.”

For now, GAO investigators plan on visiting one installation from each service, with an overseas base likely among the mix, Stewart said. But no final decisions have been made. He anticipates the full study to be complete by the spring.

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