Payday lenders target young military families
Our view: Laws are needed to save them from crushing debt and, at the same time, enhance our armed forces' readiness
Passing new laws to rein in payday lenders would not only save many American families from triple-digit interest rates and crushing debts but would also enhance our nation's security.
Payday loan offices are proliferating in the United States. It's a mean-spirited business but a fast-growing one. A 92-page study released by the Department of Defense on Aug. 9 found that there are about 23,000 payday loan stores in the United States, a 288 percent increase compared with the 8,000 payday stores that existed in 1999.
In some communities, including Tucson, payday stores are clustered around military bases. The Defense report contained maps of bases in California, Florida, Kentucky, Texas, Virginia and Washington where payday lenders dot the periphery of the installations.
The study found that in the ZIP codes around Davis-Monthan Air Force Base, there are 12 more payday lenders than you would expect to find based on statewide averages.
Payday lenders prey upon consumers who are young and financially inexperienced — the kind of people likely to need an emergency loan. Not coincidentally, many military personnel fit this category.
The problem is, when military men or women are unable to repay loans, it's not just a personal issue but affects the nation's military readiness.
The Associated Press reported in Friday's Star that the Pentagon has joined the fight against payday lenders because financial problems are keeping a growing number of troops from deploying overseas.
Capt. Mark D. Patton, the commanding officer at Naval Base Point Loma in San Diego, told the AP: "An individual under excessive financial stress is subject to his integrity being compromised.
"Almost every case of espionage in our military has in some way had ties to financial greed or need on the part of the individual."
The AP reported that under Navy rules, sailors whose debts are more than 30 percent of their income cannot be sent overseas, because their financial problems could distract them from their duties or, worse, make them vulnerable to bribery.
It's bad enough that nonmilitary families often take out loans that start at 400 percent annual interest that must be repaid by the next paycheck, according to the Consumer Federation of America, an advocacy group. Military members who are unable to repay these loans can lose security clearances or be temporarily removed from assignments.
The Center for Responsible Lending, a nonprofit group that advocates against abusive financial practices, reported in September 2005 that active-duty military personnel are three times more likely than civilians to take out payday loans. The center based its finding on the payday-loan industry's own data.
The center also reported that one in five active-duty service members were payday borrowers and that predatory payday lending was costing military families more than $80 million in fees every year.
The Defense Department estimated in the August report that 225,000 service members — 17 percent of the military — use payday loans.
Patton, the Navy commander, told the AP that security clearances were denied or revoked for some 2,000 sailors last year. He said other branches of the military are seeing a similar trend.
"I have guys guarding my gate here when they should be deployed to Iraq," Patton told the AP.
One possible solution to the problem of payday lending to military personnel is a measure introduced by Sens. Jim Talent, R-Mo., and Bill Nelson, D-Fla., that would cap the interest on payday loans to troops at 36 percent annually.
We believe the measure, an amendment tacked onto the fiscal year 2007 defense authorization bill, is a step in the right direction.
We urge Congress to approve the Talent-Nelson amendment. We believe it would prevent financial hardships for military families and improve the armed forces' ability to deploy troops.
If Congress can find a way to protect military personnel from financial calamity wrought by payday lenders, then perhaps later it can do the same for civilians.
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