- The Washington Times - Monday, June 27, 2005

America’s military bases are under siege by an army of financial predators known as “payday lenders.”

Legislation in the U.S. House of Representatives, H.R. 97, called The Service Members Anti-Predatory Lending Protection Act, would protect our military from these fiscal parasites by capping outrageous interest rates. Unfortunately only a handful in Congress take the threat seriously.

You’ll find payday lenders in storefront offices and check-cashing outlets up and down East 22nd Street in Tucson right outside Davis-Monahan Air Force Base. They line the highways near the big Navy bases in Norfolk and Hampton, Va. And they surround the Camp Pendleton Marine base in California with neon signs offering “Instant Loans” and “Quick Cash.”

Military towns are the favorite hunting grounds of the payday lenders for one very good reason — these lenders have become rich by victimizing service people and their families with short-term loans at usurious interest rates. Payday lending has grown into a $40 billion a year industry by charging customer-victims real interest rates of 400 percent yearly and often much more.

More shameful is the fact it is perfectly legal in 37 states. Those states have accommodated the payday lenders with exceptions from state usury laws. Even in states where payday lending is illegal it often flourishes anyway with lenders thinly disguising their operations or just simply ignoring the law.

With our servicemen and -women putting their lives on the line for America in two war zones, it’s way past time that America counterattacks to protect servicepeople from this kind of financial abuse at home. We need cooperation at the state and federal levels to firmly limit the interest these lenders can charge along with aggressive investigations by Congress and the states into the abuses committed.

A great first step would be hearings before the House Veterans Affairs and Armed Services Committees of the Service Members Anti-Predatory Lending Protection Act, sponsored by Rep. Sam Graves, Missouri Republican. This bill would cap all annual percentage rates at 36 percent and place new guidelines on loan renewals, and disclosures.

Service people are by no means the only victims of payday lenders, but they are an easy target, especially in wartime. The disruption of overseas deployment causes financial stress for families. This is especially true for the families of reservists and those in the National Guard — 40 percent of the troops fighting in Iraq. Many have left higher-paying civilian jobs for extended tours of active duty. With bills mounting for the folks at home, there’s the constant temptation to raise some quick cash through a payday lender.

Then the trouble begins. Payday loans are typically two-week loans at an interest fee of 10 to 30 percent. That’s not an annual interest rate. It’s what you actually pay the lender for the privilege of holding their money for just two weeks.

In a typical case, the borrower writes a check for $500 plus an interest fee of $75, dated to coincide with the borrower’s next payday.

On payday, the lender cashes the customer’s check for $575. That puts a major dent in the customer’s bank account, especially the account of a soldier or sailor. So the borrower makes another short-term loan for another hefty interest charge. Then, the borrower is caught in the payday loan spiral, never having enough money to pay off the loans but falling deeper into debt every payday as interest charges mount.

This is very close to how criminal loan sharking rings operate. Hook the victim with a short-term loan at a usurious interest rate and when the victim can’t pay, keep bleeding him or her with mounting interest charges and expanded loans.

The shocking difference between loan sharks and payday lenders is that the loan sharks’ typical annual 250 percent interest is considerably less than what payday lenders collect.

No American should be victimized like this, least of all those wearing our country’s uniform. I see those “support our troops” stickers displayed coast to coast. If Americans want to back that sentiment with some practical support at home, we can start by coming down hard on the payday lenders.

Ronald A. Duchin, a retired U.S. Army colonel, is executive director of the Concerned Veterans Communications Coalition, dedicated to helping active-duty service members and their families.


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