Preying On Our Military

The Unpatriotic World Of Predatory Lending

All across America sleazy loan predators are targeting our nation’s military. They’re not exactly threatening to break knees, but they are crippling our troops. Tomorrow, the Senate will hear about a Pentagon report about how deep and dangerous this threat has become. Here’s all you need to know about today’s Big Issue: Predatory Payday Lending and Our Military.

Facts For The Good Fight

ONE — WHAT IS A PREDATORY LOAN

Predatory lenders go after the financially weakest – the millions of Americans who have no savings, who live paycheck-to-paycheck, the elderly, the military. Here’s how one of these “payday loans” works: The predator advertises cheap loans fast. Borrowers bites the hook and comes in; they get cash and need to show nothing more than a pay stub and a blank check. The borrower hands over a post-dated check; the lender gives them cash and charges a fee (usually somewhere from $15 to $30.) If the borrower can’t pay the full amount in 2 weeks, the lender allows the loan to “roll over”…and charges another round of fees. And thus, payday loans average about $350 and will cost anywhere from 390% to 780% annual interest rate. Here’s the math, courtesy of the Center for Responsible Lending: The average guy who borrows $325 will pay $1,105. [DOD Report on Predatory Lenders and the Military]

TWO — THE MILITARY

According to reports, as many as one in five members of the military are in trouble with payday loan centers. At least 175,000 people – 13-19% of the military – took out one of these high-interest, short term loans last year alone.

THREE — PREYING ON THE MILITARY

Payday lenders prey on the U.S. military. A new study by Professors Chris Peterson of the University of Florida and Steven Graves of CaliforniaStateUniversity show payday lenders cluster around bases in massive densities, in much higher proportions than in other areas. Example: In Camp Pendleton Marine Corps’s zip code, there are 22 payday lenders, or 17 more than there would be based on Oceanside’s population. There are 18 payday lenders within 3 miles of Fort Hood, TX; “13 of those are within one mile of base.” [DOD Report on Predatory Lenders and the Military]

FOUR — HURTS OUR SECURITY

Predatory lending hurts the military and our national security. A) There’s always the fear that military personnelin debt can become security risks, susceptible to bribes; B) The Navy and Marine Corps had to deny security clearance to 2,000 service members last year because they were worried their debt levels could compromise key operations. The Navy revoked security clearances due to financial reasons 8 times more last year than they did four years ago; and c) Service members must have their finances in order before they’re deployed. At a time when our military is stretched so thin, we can’t afford to have service members hobbled by debt and unable to serve.[Defend All From Payday Loans]

FIVE – WHAT DO WE DO?

Tomorrow, the Senate Banking Committee is holding a hearing on predatory lending and the military. Lawmakers last year asked the Pentagon to look into the crisis; the Pentagon will report tomorrow on their damning findings. One thing the Pentagon has asked Congress to do: cap the annual percentage rate these predators can charge the military at 36%. Other recommendations include more financial education for our troops and outlawing sneaky little fine print many of these places put into their contracts saying service members must waive their right to legal action against them. [DOD Report on Predatory Lenders and the Military]

Power Point

Predatory Lending and the Rest of Us

HIGH-COST LOANS

Last year, 26.2 of Americans took out high-cost loans for their homes, up from 15.5% in 2004 and just 5% in 1994. (Definition of a High-Cost Loan: Loans w/ interest rates at least 3 percentage points higher than normal. And believe me, 3 percentage points can mean a lot of cash. Example: If you have a $300,000 home loan, a 6% interest is $1,799 a month. A 9% loan costs $2,414 a month, or $615 more out of your pocket every 30 days.)

CREDIT CARD COMPANY PREDATORS

According to a yet-to-be-released survey of 356 debtors who filed Chapter 7 bankruptcy in 2001, 96 percent reported that they had received offers for credit cards, car loans, mortgages and other credit in the year after their debts had been discharged. Of those, half said they received at least 10 solicitations a month.”

PREDATORY PAYDAY LOANS

Right now in the United States, there are more payday lenders than McDonalds and Burger Kings combined. (That’s a lotta lending.) According to the Center for Responsible Lending, only 1% of borrowers are able to pay their loans off in the two-week period and don’t borrow again that year. This math is easy: That’s 99% who get caught in the predatory loan trap.