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An unusually large number of payday loan shops are located near military bases and tend to prey upon men and women in uniform.
In a rare move, two California military leaders pleaded with California state law makers to help combat the “legalized loan sharks.”
Sgt. Maj. Wayne Bell, Marine Corps Installations West, and Navy Capt. Mark Patton, commanding officer, Naval Base Point Loma, San Diego, asked the Joint Committee on Boards, Commissions and Consumer Protection, to clamp down on high interest lenders and the practice of payday loans during a hearing May 23 in Sacramento.
Patton asked the legislature to crack down on the rising number of loan offices which line the roads near military installations.
“This is a direct threat to military readiness,” Patton told the committee. “There are nearly four payday lenders for every McDonalds in California.”
The payday loan industry likes military members because they are often in financial need but at the same time have steady paychecks, which make it more likely that the loans will be repaid.
“They prey on our young when they’re most vulnerable,” said Bell.
In order to tide themselves over until the next paycheck service members frequently take out cash advance loans. The problem is that they often fail to realize that borrowing money at 400 percent per year can lead to an endless circle of debt.
Here is an example: A Marine is $200 short of having enough money to pay his bills, so he borrowed it from a payday lender who charged him $60 for up to 15 days. His plan was to repay the money when he received his next paycheck in two weeks. When the time came, he still didn’t have enough money to pay off the amount he borrowed plus the $60 fee, so he paid an additional $60 fee and rolled his payday loan over for another two weeks. The cycle continued, and at the end of six months he had paid $720 in fees and still owed the original $200.
A recent article by the San Diego Union Tribune stated in 2001 the Navy Marine Corps Relief Society gave a total of about $5,800 to nine service members nationwide so they could pay off their payday loan debts. In 2006, the NMCRS spent $987,000 on 1,509 service members.
Ray Caldwell, base director for NMCRS, says the society has in fact assisted service members with payday loan debts.
“We have paid payday loans off when it has become deemed the best interest of the command or service member and to be combat ready,” said Caldwell. “Typically we don’t, but when it’s in his or her best interest we will help them break the cycle. This requires approval by our headquarters in Virginia.”
The problem has grown so great that the military considers payday loans to be one of the greatest threats to the armed forces as a whole. It affects military preparedness. Marines who are preoccupied with their financial troubles are distracted from their main obligations.
Patton said since 2000, the number of revoked security clearances has increased 1,600 percent and is a top reason service members can’t deploy overseas.
“At a time of war, it is unacceptable to lose this kind of talent and valuable resource,” said Patton.