Of course, we want to stop seeing payday loan companies from preying on ANYONE – with their sickening interest rates that make it impossible for people to get out from under that debt – but they go out of their way, along with other groups, to prey on naive, young people who have just joined the military. Having lived in a Marine town (Oceanside) and then married a Coastie, I’ve seen many businesses like this try to scam guys and girls who have very little money.
Payday loans to troops grow
INDEBTED SAILORS CAN’T GO OVERSEAS, SPURRING CONCERN
By Thomas Watkins
Associated Press
SAN DIEGO – With a family to feed and no money for groceries, Navy Yeoman 2nd Class Damon LaForce recently did something the military is trying to crack down on: He went to one of the many payday-lending businesses near his base for an instant loan.
Essentially, he borrowed against his next paycheck: After showing his military ID and a proof of address, LaForce wrote the lender a postdated check for $300. Five minutes later, the sailor walked out with $255 cash in his pocket.
``It was easy,’’ LaForce said.
The $45 charge for his two-week loan would amount to an annual interest rate of a staggering 459 percent.
Worried that too many members of the military are falling victim to ruinous interest rates and getting into deep financial trouble, the Pentagon is backing an effort in Congress to slap a nationwide cap of 36 percent on payday loans to troops. An increasing number of states are taking steps, too.
In a report released last month, the Defense Department estimated 225,000 service members - or 17 percent of the military - use payday loans. The Center for Responsible Lending, a non-profit group seeking stricter industry controls, says that one in five service members took out such a loan in 2004, and that someone who borrows $325 pays an average of $800 in charges.
In the six weeks after he borrowed from a payday lender, LaForce was short again, so he renewed it once, then took out another loan to pay off the first. Total cost: $150 for a $255 advance.
``You are not doing a service to an individual who is already short on cash, so he’s living not just paycheck to paycheck, but from almost paycheck to almost paycheck,’’ said Capt. Mark D. Patton, the commanding officer for Naval Base Point Loma in San Diego, where LaForce is stationed.
Patton said the Navy is worried that payday loans are contributing to the surge in the number of sailors who cannot be sent into duty overseas because of financial problems. Under Navy rules, sailors whose debts are more than 30 percent of their income cannot be sent abroad, because their financial problems could distract them from their duties or, worse, make them vulnerable to bribery.
Patton said that since 2000, the number of sailors and Marines barred from deployment because of financial problems has climbed 1,600 percent, straining an already stretched military. Security clearances were denied or revoked because of financial difficulties for about 2,000 sailors last year, and the trend is similar in other services, he said.
Lenders say payday loans offer a service when no one else will and contend that a lower cap could force some lenders to close, driving sailors and soldiers to unregulated lenders, including Internet sites registered outside the United States.
And the trade group representing payday lenders, the Community Financial Services Association, said members of the military are a small portion of business and are not victims of unscrupulous lenders.
Twelve states prohibit triple-digit rates on payday loans, according to the Consumer Federation of America. They are Arkansas, Connecticut, Georgia, Maine, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Vermont and West Virginia. In New Mexico, borrowers can renew payday loans only twice.
On Thursday, California legislators rejected a bill that would have given military borrowers a 180-day grace period and no-cost extensions while they were on duty overseas.
