Payday loans aren't the answer to financial woes
July 23, 2006 - Yokosuka Naval Base, Japan
You get a regular paycheck. You may have little financial experience. You deploy at a moment's notice around the world. That's why the military is the perfect prey for predatory lenders.
"Lenders know they're going to get a paycheck out of someone in the military," said Kelley Finch, Navy-Marine Corps Relief Society's outgoing director at Yokosuka Naval Base. "Plus, servicemembers travel a lot and are away from their support networks. Overseas, they might not know their options."
Though paycheck-lending agencies aren't springing up around military bases in Japan and South Korea like they are stateside, U.S. servicemembers needing quick cash or lower monthly credit debt payments still get caught in the "downward spiral" of predatory practices, Finch said.
In Japan, U.S. servicemembers "find them online," Finch said.
The Navy-Marine Corps Relief Society is tracking the problem in Yokosuka and have seen about 10 cases in the region this year, she said.
"It seems to keep increasing," said Chuky Spivey, the group's incoming director.
Other services in the region are finding similar effects. Only one physical payday lender operates on Okinawa but several Marines on the island have used the Internet to get loans, Navy-Marine Corps Relief Society Okinawa director Allison Green told the Okinawa Marine last week.
Okinawa's NMCRS offers interest-free loans to help servicemembers avoid pitfalls that lead to high-interest loans.
Last month, the society helped three servicemembers pay off $8,000 in payday loans using emergency relief loans and grants, Green told the paper.
At Camp Zama, Japan, Army Community Services director Mardy Clark said he hasn't encountered soldiers who've taken out loans online, and there are no predatory lenders off base. But a few soldiers have come in with high-interest loans from the States they took out to help pay the cost of changing stations.
"PCS is a tough time and they're short cash. That's the perfect time for them to be targeted for this," Clark said.
ACS was able to provide the soldiers other loans through the Army Emergency Relief program to help pay off their debts. For one payday loan, the interest was 30 percent and quadrupled for every month a payment was late: Three months late meant almost 500 percent interest, Clark said.
"Even 30 percent for a lower enlisted soldier is almost too much to overcome," he said.
In South Korea, financial specialists also haven't seen many cases. The legal office at Kunsan Air Base only has seen about one case of payday loan problems this year, and it was a result of a stateside loan.
Allison Blake, the financial readiness program manager and Army Emergency Relief section officer for Army Community Services in Area II, said she hasn't seen a single case in the three months she has been in country. But she saw plenty doing the same job in the States.
She recommends that servicemembers, retirees and civilians -- anyone can come to her office -- ask for help before even thinking about a payday loan.
"If you feel like you need a loan, first speak to a financial counselor and AER counselor. There may be something we can help them with," she said.
Payday loans often start as a short-term loan on a future paycheck, sometimes from a company with "military" in its title. To keep customers in debt, such lenders often use triple-digit interest rates and loan flipping, a refinancing scheme that comes with high fees and little or no real benefit to a borrower seeking to lower monthly payments. These tactics most often are seen in payday lenders and rent-to-own furniture scams, Finch said.
"It's legal loan sharking," Finch said. "Anything over 36 percent interest is predatory -- and I've seen them up to 800 percent. It's unreasonable to think that anyone can pay that back."
A recent Defense Manpower Data Center survey showed 13 percent of the Navy's sailors used a payday loan in 2005. The Center for Responsible Lending estimates that active-duty military personnel are three times more likely than civilians to have taken out a payday loan and that one of five active-duty military personnel were payday borrowers in 2004, according to its Web site.
The Navy has responded by calling on leadership to educate sailors on the reality of payday loans and has created a task force to seek solutions.
A financially stressed sailor can be an issue of operational readiness, Finch said. Moreover, a bad run-in with a predatory lender can have serious repercussions, as failing to repay a loan is a violation of Uniform Code of Military Justice. Sailors can face court-martial and lose their security clearance.
"People don't think of the consequences," Spivey said.
The relief societies are shouldering some of the burden. The Armed Services Relief Society's spent $2.5 million on the problem from 2001 to 2005, Finch said. But don't confuse the private nonprofit with "an open checkbook," Spivey said. "You could have someone who took out a loan because they wanted a vacation or you could have someone whose mother needed a kidney operation," Spivey said. "We look at all cases individually."
But confidential counseling about stopping the spiral is guaranteed to all who stop in, Spivey said. "Education is the most important thing we can do."
The Stars and Stripes, Allison Batdorff and Juliana Gittler, Staff Writers
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