Payday lenders sit outside military bases, waiting for prey

AN AIR FORCE retiree e-mailed me Thursday asking if I knew why payday lenders — he called them “bottom-feeders” — prey on the military.

He already had an answer.

“They know they will get their money if the GI defaults or refuses to repay. Very few agencies in the civilian world can pressure an employ(ee) to make good in financial debts. In the military, a commander can and will garnish the military member’s wages if necessary to repay a legal debt. It’s just that simple.

“Many young troops under my supervision fell prey to these types of loan scams, but today, the AF has stepped up internal help via the Family Support Center (FSC),” he wrote. He said the Air Force Aid Society helps military personnel when they have emergency financial needs, from car repairs to emergency travel, by offering grants or no-interest loans.

The military is finding that it has to be ever more vigilant in protecting soldiers from payday lenders out to separate them from their cash. It’s certainly important to educate military men and women to help them become more financially literate and to help them spot unsavory lenders. But it’s also important for state legislatures and Congress to place tougher regulations on payday lenders, for the sake of military and civilian consumers.

The military is an especially attractive group of marks for the payday lending industry. A study released in March by two college professors concluded that “there is irrefutable geographic evidence demonstrating payday lenders are actively and aggressively targeting U.S. military personnel.”

The study examined state laws and used computer mapping to analyze payday lenders in 20 states with military bases, including South Carolina. It was conducted by Christopher L. Peterson, an assistant professor at the University of Florida’s Levin College of Law, and Steven M. Graves, an assistant professor of geography at California State University.

Fort Jackson works to head off financial disaster for soldiers caught up in the payday lending world by offering free and confidential financial counseling.

Madelyn Mercado, financial readiness program manager with Army Community Services at Fort Jackson, said it’s easy to tell payday lenders target soldiers. Just take a look at the many lenders that line major roads near the fort, such as Decker Boulevard.

Ms. Mercado said the problem is “pretty serious.” Some soldiers are sucked in by the simple process. “It’s quick, easy money,” Ms. Mercado said. “All they want is a copy of your pay stub.”

“Most of the time, we get them (soldiers) after the fact, when they have incurred the loan and can’t afford to pay it,” she said.

She said she doesn’t keep count of the number of soldiers who come in ensnared by payday lenders, but she sees a lot. “Of the people I see, a high percentage has had at least one or two loans with a payday lender.”

Ms. Mercado said some lenders hound service members and threaten to call their first sergeant or commanding officer. “They wouldn’t do that in the civilian world,” she said.

At least they’re not supposed to. In South Carolina, it’s illegal for payday lenders to threaten borrowers with things such as jail or the garnishment of wages.

Service members tend to have demographic characteristics associated with debt problems, said Peterson’s and Grave’s report:

• “The great majority of military service members are young enlisted personnel.” Junior enlisted personnel — those who Ms. Mercado sees struggling with payday lending — make up 75 percent of the military.

• A large number are recently married and have young children.

• Historically, many have come from lower-income backgrounds.

• While some have college education, many don’t. The study says nearly half of enlisted personnel say the primary reason for joining the military is to receive assistance to get that education.

The study outlines various other characteristics of the military, including the disproportionate numbers of African-Americans and a growing number of single parents.

“Consumer finance research suggests these demographic characteristics of the nation’s enlisted military personnel are serious risk factors for personal debt problems,” the study said.

“Many commentators have argued that individuals with limited education and financial experience have greater difficulty shopping for lower priced loans, leaving them at risk for marketing by high-cost predatory lenders.”

The report also said the way service members get paid and the amount of their pay place them at risk. “The most important aspect of military compensation is the lack of it. Junior enlisted military personnel are low-wage entry level workers. A typical Army private first class makes $16,884 per year. Like all low-wage workers, military personnel tend to live month-to-month, often struggling to pay their bills,” it said.

They’re prime targets for payday lenders. The lenders know junior enlisted personnel get paid each month and aren’t likely to get laid off, fired or have the business they work for fail. They’re easy to track and obligated by the military to pay their bills. That’s why lenders sit outside the gates of bases across America — including South Carolina — and wait.

That shouldn’t sit well with those state legislators — or the governor — who serve proudly in the Guard or reserves. They should act to disarm these short-term lenders out to strip servicemen and -women of their pay.

Reach Mr. Bolton at (803) 771-8631 or wbolton@thestate.com.