Banking rules can create hassles for overseas troops
After a year of searching, Air Force Lt. Col. John Dyck thought he had found his piece of Alaskan paradise.
He planned to eventually retire and build a home on a 10-acre property nestled along Alaska’s Eagle River, near Anchorage. He would buy a riverboat, a truck and a new car.
As a member of the USAA Federal Savings Bank for more than 20 years, he called them to apply for three loans and to open another savings account.
He was denied on all four requests, but not because of poor credit or inadequate funds.
Dyck was denied service with the bank because he is stationed at Osan Air Base in South Korea.
“Essentially, if I want to buy anything, I can’t,” Dyck said. “If I’m buying a U.S. product made in the U.S., with a U.S. paycheck, and the product is going to stay in the U.S., how is that business in Korea?”
Was it the law?
USAA officials say South Korean law prohibits them from doing most new business with U.S. troops who are stationed in the country because the bank has no legal presence on the peninsula and therefore doesn’t fall under South Korean regulatory jurisdiction.
However, a South Korean Ministry of Finance and Economy spokeswoman, when informed of Dyck’s case, said neither the loans nor the new savings account violate South Korean law.
“There is no such regulation/law in Korea, which prevents U.S. banks from lending funds for domestic consumption (including purchase of U.S.-based properties) to U.S. nationals living in Korea,” spokeswoman Min Kim said in an e-mail.
Regulatory roadblocks could have come into play during a cross-border financial transaction, she said — for example, if funds were coming from a South Korean employer or bank account.
An official with the Office of Thrift Supervision, which regulates USAA in the United States, said they had no problem with USAA doing business with USFK troops, but that any such business could be subject to foreign laws.
When Stripes informed USAA of the Korean ministry’s comments, bank officials expressed skepticism, saying it might just be a case of differing stories from different people in the same regulatory agency.
They said they are going to officially seek new direction.
“We would have to get something official from the ministry,” USAA spokesman Paul Berry said.
“But frankly,” he added, “that’s good news. We would love to be able to do business with Col. Dyck. We want to do business with all our members anywhere we possibly can.”
USAA admits mistake
USAA officials admitted that their decision to deny Dyck’s request for a real estate loan was a mistake.
Very few banks in the world approve loans on property located outside of their registered country, because they don’t have the expertise or a simple way of checking up on the property. Hence, it would be nearly impossible for Dyck to get a loan on a U.S. property from a South Korean bank without a U.S. presence.
Because South Korean and many other world banking regulators accept this, USAA said it could approve Dyck’s loan for U.S. real estate without much hassle.
However, Dyck’s real estate loan request was so unusual that USAA phone service representatives would not have known this, Berry said. They are instructed to deny all loan applications coming from troops in South Korea, including real estate loans.
“Had it been escalated up, he would have been taken care of,” Berry said.
Dyck said he tried to talk to upper banking management before telling Stripes of his dilemma.
He called the USAA’s San Antonio phone number and was first denied by a service representative. He asked for a supervisor and was denied once again, he said. Dyck said he asked for a higher supervisor, but was told the policy would not change.
A worldwide problem
USAA hasn’t provided most new financial services in South Korea since the early 1990s because of South Korean law, they say.
Dyck said USAA service representatives told him that similar restrictions exist in Japan.
Sources at the Japanese Ministry of Foreign Affairs and Financial Services Agency said they did not know which law USAA was referring to, either in Japan or South Korea.
Japan cannot regulate a U.S. bank’s dealings with anyone covered by the status of forces agreement between the countries, they said.
The U.S.-Japan SOFA agreement addresses banking and grants rights to SOFA status personnel banking with U.S. banks, independent of the Japanese system. However, the law talks mainly about “military banking certificates” used in post-WWII Japan.
USAA officials claim they have run into “regulatory entanglements” when trying to work with servicemembers serving abroad in the past.
Some European countries are particularly difficult, according to USAA, a banking and insurance giant with 5.6 million members affiliated with the military either through service or family.
For example, USAA can provide banking services to anyone in Germany with a military mailing address, but cannot provide service to Americans without one, a spokesman said.
USAA has a letter from Belgium’s regulators expressly forbidding it from doing business with servicemembers. England allows some services, but not others.
USAA does offer auto and renter’s insurance to troops living overseas, officials said.
Meanwhile, Dyck is reconsidering his options. The 22-year veteran doesn’t plan to retire in the near future, and likely won’t be returning to the United States until 2008.
The land Dyck wanted is still on the market and has actually dropped in price. The boat has since been sold. He put down a $1,000 deposit with AAFES new car sales for the truck, but won’t take delivery until 2008. He said he’ll probably use the truck company’s financing for the purchase.
“I did want to go with USAA,” said Dyck, who has been a USAA member for 20 years. “But now I’m considering getting out of them completely.”
E-mail Erik Slavin at: firstname.lastname@example.org