Loans strap G.I.s

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How our government supports the people fighting it's war. Loans strap G.I.s

Quote:

Thousands in heavy debt as 'payday' firms rake it in

By RICHARD SISK
DAILY NEWS WASHINGTON BUREAU

WASHINGTON - More than 100,000 U.S. troops have been saddled with long-term debt in return for short-term cash from "payday loan" stores charging interest rates that would make the mob blush.
And the loan industry's powerful lobbyists, both Democratic and Republican, are fighting hard to keep the interest windfalls, which in at least one case topped 500%, the Daily News has learned.

"The troops get roped into it and they can't get out; it becomes a spiral," said Joyce Raezer of the National Military Families Association.

But spokesmen for the industry argue that stores with names such as Planet Cash offer a service "bridging the gaps between paydays" that banks, credit unions and the military can't or won't provide - same-day loans to troops who are credit risks.

At a typical payday store, a borrower would show a pay stub and proof of a bank account to borrow $100 for a charge of $120. The borrower writes a check for $120 and postdates the check to his next payday.

After two weeks, if the borrower can't pay, the loan is rolled over for another $20, and Pentagon officials said most troops go through four or five rollovers.

Army Chief Warrant Officer Thomas Burden, who is now serving in Iraq, told Congress he paid back $1,400 on an original loan of $300.

"It just kind of keeps snowballing if you don't have the money to cover it," said Burden, 35.

In a letter supporting congressional efforts to curb the payday business, David Chu, the undersecretary of defense for personnel, estimated that 7% of the active-duty military, or 100,000 troops, used the loans, but consumer groups said the number could be as high as 20%.

While complaining about "predatory lenders," the military also has failed to control the business, the Government Accountability Office, the investigative arm of Congress, found.

In a report last spring, the GAO urged commanders to consider declaring the payday stores off-limits to troops and stopping the stores from advertising in base newspapers.

The Community Financial Services Association, the trade group for the booming $40 billion payday business with 22,000 U.S. outlets, rejected the charges of predatory lending.

"It's so easy to demagogue," said association spokesman Steve Schlein. "We provide a product people are begging for."

If the military objects to payday loans, Schlein added, "Then why don't military credit unions offer short-term loans?"

Several bills have been introduced in Congress to rein in payday loans to the military, but the financial group has marshaled platoons of former Republican and Democratic officials to lobby against the legislation.

The dispute has put old friends at odds. Sen. Hillary Clinton (D-N.Y.) has been pushing for limits and co-sponsored an amendment added to the defense spending bill to educate troops on personal finance.

Pushing back has been Maria Echavaste, a deputy chief of staff to former President Bill Clinton and now a lobbyist for the financial services group.

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au1929,

Boy, can I relate to this! We had an emergency come up and needed $250.00 right away. That $250.00 cost $45.00 for 14 days. And it's very hard to come up with that $295.00 without taking away from some other bill that needs to be paid, so the easier thing to do is the rollover for $45.00 for another two weeks. That's $90.00 a month! These people do provide a service, but they also rob you blind!

And to do this to our soldiers? Absolutely beyond comprehension to me!

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Momma
And again congress is selling out to the lobbyists.

Is guess the credo is support the troops except when the lobbyists say no.

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It would seem so. So much for a cap on interest rates. The annual interest rate on that $250.00 is 425%.

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Quote:

How our government supports the people fighting it's war.

Au- How is the government "supporting" this practice? Sure, the interest that these folks charge is unconscionable. But apparently it is legal. So if someone is stupid enough to get caught up with one of these deals, it is the person's, and NOT the government's fault, IMO.

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Phoenix32890 wrote:

Quote:
How our government supports the people fighting it's war.

Au- How is the government "supporting" this practice? Sure, the interest that these folks charge is unconscionable. But apparently it is legal. So if someone is stupid enough to get caught up with one of these deals, it is the person's, and NOT the government's fault, IMO.

Hi Phoenix,

I hope you had a wonderful holiday.

Unfortunately, I was one of those stupid enough to have to do this.

http://users.pandora.be/eforum/emoticons4u/sad/1346.gif

Sometimes in life you don't really have too many choices. For me, this was one of them. It cost me, yes. But, if this option had not been there, the consequences would have been worse for me.

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Phoenix32890
Most people are I am sure unwilling participants. As for it's legality. It is legal because congress allows it to be. They, as long as the lobbyists pay off, will continue to support usury

This is legalized loansharking.

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It's capitalism. No one is forcing anyone to take loans. That's what banks and credit cards are for. To give people money now so they can pay it back later.

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This is true, McGentrix, but don't you think they might possibly be taking advantage with that interest rate? I understand that it is legal, but I have to agree with au1929, it is legalized loansharking.

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Guys, there are a lot of things out there to which the old expression "caveat emptor" applies. In this life everyone has choices. In some cases it the attempting to discern the best of two rotten choices.

No one forces these people to get the loans. As an adult, each of us is responsible for our own choices, and sometimes they do not turn out well.
And then we have to take our "lumps".

au1929 wrote:

Most people are I am sure unwilling participants.

Did anyone force these people to get these loans? Did anyone hold a gun to their heads and insist that they get into debt? of course not. They did it of their own free will.

MommaAngel wrote:

It cost me, yes. But, if this option had not been there, the consequences would have been worse for me.

In Momma's case, one alternative would have been worse than the other. It is not up to the government to act in loco parentis. She knew the deal, and chose the best of two lousy choices. Often that happens in life.

One thing that the government might want to do is to educate the troops about the the problems that might occur when a person deals with these companies. But it is not up to the government to hold these peoples' hands.

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I have a somewhat retarded stepson who loved the idea of "borrowing" and "repaying with interest"--real grown-up stuff here, right?

He was warned by us and by his social workers not to play with the sharks--but he eventually wound up paying nearly $300 in interest for a sophisticated $100 loan.

The trouble with Loan Sharks is that they offer deals for the desperate--and the desperate aren't particularly thinking clearly.

Legislation is one answer. Education would be another.

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au1929 wrote:

Momma
And again congress is selling out to the lobbyists.

Is guess the credo is support the troops except when the lobbyists say no.

Hey AU,

Support the Troops ... when it's profitable!

Anon

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Noddy24 wrote:

The trouble with Loan Sharks is that they offer deals for the desperate--and the desperate aren't particularly thinking clearly.

Legislation is one answer. Education would be another.

Education IS the answer. Legislation is not, IMO. A person has the right to make stupid decisions w/o governmental interference. If an individual is so disabled mentally, there are legal ways to have the person declared incompetent, so that he is not legally able to enter into contracts.

It may have been aggravating for you and your husband to see your stepson making a stupid move, but that WAS his right.

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Quote:

Third Quarter 2003
08/01/2003

Third Quarter 2003
CAUTION: MILITARY TARGETED MONEY SCAMS
Predatory lenders, check cashers, high-cost car dealers and insurance groups will often station themselves around military installations in hopes of grabbing as many hard-earned military dollars as possible. In the end, they can sometimes prove to be more harmful to troops and troop morale than the enemy in the battlefield. A soldier's mind concentrated on over-exerted finances is not alert on the battlefield or the immediate world around him, where it should be.

Professional scam artists target the military community for several specific reasons: its high youth-oriented population, general lack of financial knowledge, steady paychecks and the constant relocation of its personnel.

Currently, the worst financial offenders to military communities are "payday lenders."

Payday loans are small-dollar, short-term, unsecured loans borrowers promise to repay out of their next paycheck. Because these loans have such short terms to maturity, the cost of borrowing, expressed as an annual percentage rate, can range from 300 percent to 1,000 percent or more. Payday lenders are not yet deemed "illegal" by the government, but they are under heavy scrutiny at the moment.

High-cost lenders target car owners and would-be car owners on military installations. They attempt to finance new cars at a much higher interest rate than what the borrower is qualified for. They make money on many new car buyers who do not have a frame of reference for what a "good" interest rate is and also don't know interest rates on automobiles can be bargained for, much like the sticker price on the car itself.

Some pawn shops are getting into the car business posing as money lenders. These lenders will grant money out of a car's equity at an extremely high interest rate, adding a second lien to the automobile. Many times the borrower cannot repay the loan because of the extremely high monthly payments and the car is lost to the lender for a fraction of its value.

Younger soldiers aren't the only ones who are singled out and targeted for money scams; veterans are targets, too. Certain companies will offer "buyout programs," attempting to pay for an entire benefit package with one lump-sum payment, which is not only unfair to the retiree but extremely illegal. (From www.fdic.gov, www.consumerlaw.org, and a Washington Post article by Jennifer C. Kerr)

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You see the same thing every spring when the "tax refund" companies offer to give a person their tax refund before the I.R.S. gets around to it. What a lot of people don't realize, is that this is simply another form of loan. Would you suggest that the government legislate against that practice also?

There is no doubt that there are many places where individuals can get themselves into trouble financially, and it is sad. The point is, that the government is not a baby sitter. People need to know what they are doing, BEFORE they sign that contract.

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Phoenix--

His father was disraught. I felt it would be an Educational Experience. I have a lot of accurate thoughts.

Given the stress that the military inflicts on marriage, I'd think that Financial Planning should be a part of Basic Training--or at least "Ongoing Training".

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Noddy24 wrote:

Phoenix--

His father was disraught. I felt it would be an Educational Experience. I have a lot of accurate thoughts.

Given the stress that the military inflicts on marriage, I'd think that Financial Planning should be a part of Basic Training--or at least "Ongoing Training".

Now there is a great idea. Heck, even in high school a basic economics/personal finance class hould be mandatory.

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I got into that trap when I was young. Back in those days Shocked

we played the check float which could be up to two weeks then. Once you start, it's damn near impossible to catch up.

It's kind of digusting though, you see all this lip service to "support the troops", but the reality is that we let business prey on them! I'll have to look back in my links, but I remember several different businesses that not only preyed on the service people, they we're actually aided by the services themselves. It's pretty hypocritical if you look at it.

Anon

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Does letter-of-indebtiness ring a bell to anyone? Just maybe, if the services got out of the loan collection business, the sharks would spend a bit more time qualifying their customers.

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roger wrote:

Does letter-of-indebtiness ring a bell to anyone? Just maybe, if the services got out of the loan collection business, the sharks would spend a bit more time qualifying their customers.

Roger,

I don't think that you need to qualify for a check advance. I think they're pretty automatic.

Anon

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Loans strap G.I.s

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