With controversy swirling over whether or not military payday loans are helpful or harmful, the Department of Defense has come up with variety of resources to aid sailors in preventing financial disasters and curbing payday loan lender problems.
“Sailors are reluctant to utilize these resources, because they assume it will reflect negatively back at their command,” said Deborah Lane, financial education supervisor at the Fleet and Family Support Center at Naval Air Station North Island. “In actuality, sailors are encouraged by their commands to actively pursue financial well-being.”
Many in the armed forces are falling victim to businesses that profit from predatory payday loan lending. A recent survey by the Defense Manpower Data Center showed that 13 percent of sailors have used cash loans in the last 12 months, costing their families more than $80 million in fees a year.
Although there is no exact definition of predatory payday advance lending, the term is akinto abuse, including immense fees, excessive interest rates and outrageous insurance costs.
“These businesses prey on the financial fears of many military personnel," said Lane. “Predatory businesses promise troops generous rates, then abuse them financially.”
Predatory lenders use names like “Military Payday Loans” and “American Financial” to suggest they are affiliated with the military. Among these tactics, however, the most prevalent form of predatory lending is the payday loan, also known as a cash advance.
According to the Center for Responsible Lending, payday loans are the practice of using a post-dated check as collateral for a short-term loan. Payday loans are especially popular during troop deployment.
“There are special pressures on troops and their families when time for deployment comes around,” said Lane. “Overall spending usually rises due to an increase in income.”
A December 2004 New York Times study revealed that 25 percent of military households have been caught up in military payday loan lending, often times paying $800 to borrow $325.
“Sailors using payday loans almost always return to borrow more money,” said Chief Storekeeper (AW/SW) Junior Mottley, command financial specialists aboard USS Boxer (LHD 4).
The Navy/Marine Corps Relief Society (NMCRS) also devotes considerable attention to the financial concerns of sailors through services such as budget reviews. Service members and their families can review and better understand their monthly budget and make improvements with help from NMCRS representatives. This is meant to ensure they never need to apply for an online payday loan.