Released: August 31, 2006

Predatory lenders prey on U.S. troops

Source: By William M. Welch, USA Today

As many as one in five members of the armed services are being preyed on by loan centers set up near military bases that can charge cash-strapped military families interest of 400% or more, a new Pentagon report has found. Steep lending charges have long plagued servicemembers, but the problem has become a more urgent concern to the military as it has struggled to fill its ranks during the Iraq war. That’s because debt troubles can keep troops from going overseas.

“We’re seeing a growing trend of folks who are not eligible to deploy because of financial problems,” says Capt. Mark Patton, commander of Naval Base Point Loma in California. Patton says debt problems can cost some servicemembers their security clearances.

The report says “payday loan” stores (so named because their loans are often due on a borrower’s next payday) have sprung up by the thousands around military bases and elsewhere in the past decade.

Lenders typically charge $15 to $25 per $100 loan for two weeks, and most loans are extended for several weeks. The report says the average loan is $350 and has an annual interest rate of 390% to 780%. The average borrower, it says, pays back $834 for a $339 loan.

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