COUNTERING MILITARY RECRUITMENT
Articles: Military Service: General
Soldiers Pinned Down by Predatory Payday Loans
Martin H. Bosworth, ConsumerAffairs.Com
October 21, 2006
Adding
to the many issues facing the American military today, thousands of
soldiers are being denied overseas active duty because of severe debt
and financial problems.
The chief culprit appears to be high-interest predatory lending, which
will be at least partly reined in by new Congressional legislation.
The Navy, Marines, and Air Force have reported a steady increase in
soldiers who have lost security clearances due to severe financial
problems, according to an Associated Press report.
The numbers rose from 284 in 2002 to over 2,600 in 2006 between the
three branches, with every indication that the trend is continuing.
The Army, responsible for the vast majority of forces currently engaged
in Iraq and Afghanistan, refused to share its records of clearance loss
with the AP.
Although reasons for soldiers' increasing indebtedness ranged from low
pay to financial irresponsibility, high-interest "payday loans" were
first on the list. Payday lenders entice borrowers into drawing
advances on their next paycheck, at extremely high interest rates.
Some payday lenders charge interest of 15 percent on a two-week loan,
which averages out to a yearly annual percentage rate (APR) of 390
percent.
Because of the generally low military pay and usurious interest rates,
many military personnel fall deeply into debt with just a single payday
loan.
Military members and their families are particular targets of predatory
lenders, as they receive a steady income, but their pay is so low that
any unexpected expense may require them to take out loans, according to
the Center for Responsible Lending.
A Skinflint Congress
Last year the Department of Defense issued a warning that predatory
lending was keeping troops from being effective in the field, as they
were distracted by their financial problems.
The military stepped up its financial counseling services to urge
personnel not to spend any bonuses or advances exorbitantly, and to
avoid payday loan centers.
The continuing problems with predatory lenders led President Bush to
sign legislation on October 19 that would cap the APR of payday loans
at 36 percent nationwide.
Congress also authorized a 2.2 percent pay raise for armed forces
personnel before adjourning for the election season. The pay raise was
criticized as minuscule, given the added costs soldiers and their
families have to deal with in times of war.
States Take Action
States are also taking action against predatory lenders for both military and civilian residents.
California's Attorney General Bill Lockyer filed a $2 million lawsuit
against local payday lender Fast Cash for suing borrowers for triple
the amount of the loan if they had insufficient funds available when
they wrote checks to pay it off.
North Carolina recently finalized a series of agreements with lenders
to change their practices, leading many of the companies to leave the
state. State Attorney General Roy Cooper called it "the end of
predatory lending" in North Carolina.
The Center for Responsible Lending estimated that payday loans cost American families upwards of $3.4 billion annually.
In congratulating Congress and President Bush for passing the new
legislation for soldiers and their families, CRL President Michael
Calhoun urged them to "extend these protections to all of America's
working families."
This archive consists of a topically organized selection of
articles culled by members of the Counter-Recruitment List Serve from printed
publications and web sites. The archive is not complete. We have chosen
material relevant to the work of