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Payday loan stores are ambushing U.S. troops, officers say

Clustered near bases, lenders offer quick cash at high interest rates

By RUSS BYNUM Associated Press

Sunday, December 21, 2003

Fort Stewart, Ga. -- On Gen. Screven Way, the one-mile strip of fast-food joints and pawn shops leading to the front gate of Fort Stewart, getting a cash loan of $100 to $500 is about as easy as buying a cheeseburger.

Numerous strip-mall businesses bear names like Check Into CA$H ("Need Cash Today? It's Easy as 1-2-3"), First American Cash Advance, Gold Check C.S. Payday Advance, and PJ Cash ("Civilian and Military Welcome").

Fort Stewart has declared these so-called payday lenders enemies at its gate, accusing them of preying on U.S. troops with high- interest, short-term loans that plunge them deep into debt.

"It's like riding a merry-go-round -- once you get on, it's hard to get off," said Frederick Sledge, an emergency relief officer at Fort Stewart whose office gives interest-free loans to soldiers in financial trouble.

Military bases across the nation have become magnets for payday lenders, which charge fees as high as $30 every two weeks per $100 borrowed -- equal to a 720% annual interest rate.

Earlier this month, officials from Fort Stewart and Kings Bay Naval Submarine Base urged Georgia lawmakers to crack down on such loans. Georgia law caps annual interest rates at 60%, but violations are a misdemeanor and rarely prosecuted.

Lt. Col. Russ Putnam, a Fort Stewart lawyer, told legislators that stress over paying off payday loans hurts troop morale and the combat readiness of the post's 3rd Infantry Division, which led the assault on Baghdad. In extreme cases, soldiers saddled with debt must be discharged.

"When we lose those people because of payday check cashing, they're as good as dead to us. They are gone," Putnam told the lawmakers.

The Community Financial Services Association, which represents about 15,000 payday loan stores nationwide, denies its members are taking advantage of soldiers. In March, the association urged its lenders to suspend the collection of loan payments by troops sent to the war in Iraq.

The CFSA says that in any case, only about 2% of customers are active-duty military.

'Open for business'

Jet Toney, a lobbyist for payday lenders in Georgia, said perhaps the military needs to focus more on educating troops about money instead of bashing payday lenders as predators.

"They're not preying on anybody -- they're just open for business," Toney said. "It strikes me hard that the military protests so much when they have some responsibility on their end as well. How many 18- to 22-year-olds make perfect financial decisions?"

Navy Petty Officer 2nd Class Jason Withrow, who works on a nuclear submarine at Kings Bay, took out a payday loan to make ends meet after being hurt in a car wreck. A back injury had forced him to drop his second job loading beer kegs at the Navy exchange. Withrow soon found himself taking out loans with other payday lenders to pay the interest on his initial advance.

"In five months I spent about $7,000 in interest and didn't even pay on the principal $1,900," said Withrow, 24, of Brooklyn, Mich. "I was having marital problems because of money and didn't know what to do for Christmas for my kid."

He finally asked his commanders for help. The base emergency relief office agreed to pay off Withrow's loans. Now he has a schedule to repay the money over 18 months, with commanders watching over his finances.

Sinking into debt

Other bases say they have had similar problems with troops sinking into payday debt.

The lenders "are targeting the post primarily because of the assurance they'll be paid," said Richard Bridges, spokesman for Fort Carson, the Army post in Colorado Springs, Colo.

Lenders know they will recoup their money because they can get the military to help them collect. Personnel who do not pay up can face a court-martial and loss of security clearance, and in some cases are kicked out of the service altogether.

At Fort Carson a few years ago, officials began requiring lenders that advertise in the post newspaper to list their interest rates, some of which were as high as 560%.

At Fort Bliss, Texas, officials estimate nearly a tenth of the 10,000 active-duty troops stationed there have needed financial counseling because of payday loans and other debt problems.

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