WASHINGTON - The consequences of payday lending on military personnel are well known, and now the Center for Responsible Lending has come out with an analysis that confirms, "military families are perfect targets for payday lenders." Among some of "Payday Lenders Target the Military, Evidence Lies in Industry's Own Data" findings are active-duty military personnel are three times more likely than civilians to have taken out a payday loan; one in five active-duty military personnel were payday borrowers last year, making the number of military members who are payday borrowers at 225,000; predatory payday lending costs military families over $80 million in abusive fees every year. "Payday lenders are concentrated around bases. Steady government paychecks are a reliable source of fees for the payday lenders. Lenders can be confident borrowers will continue to pay because military people face harsh consequences, like courts martial, for not repaying their debts.The Department of Defense says payday lending is one of the top ten issues facing military families," the CRL says. Exacerbating the situation, says CRL, is the fact that most military personnel do not earn enough to get ahead or out of the "debt trap" Using a $20,000 annual salary as an example and deducting taxes and regular household monthly expenses, the CRL estimates the balance of disposable income left a military member is about $100 per paycheck. If a military member doesn't have savings, then almost any emergency can prompt the individual to seek a short-term loan, it offers. "Payday lenders take advantage of this need," it stresses, not just by pulling military members into the vicious payday loan cycle, but by concentrating payday shops around military bases. The situation has not gone unnoticed by Congress and the Department of Defense. The CRL report notes that the DOD lists payday lending among its top 10 issues of concern for military families and recently asked governors and state legislators to work with the DOD to protect service members from payday loans. In addition, military personnel have testified or written letters to state legislators asking for protection from predatory payday lenders. Military families have also testified in several states on the dangers of payday lending The report makes mention of two pieces of legislation that were introduced by Rep. Sam Graves (R-Mo.) and Sen. Elizabeth Dole (R-N.C.) that address the situation. Graves' measure would cap payday loans at 36% interest for military personnel and their spouses; Dole's amendment to the Defense Authorization bill in the Senate would provide the same protection. CRL further recommends Congress enact policies that protect military members and all citizens "from the debt trap of payday lending." Among its recommendations: * a minimum loan term of 90 days to enable borrowers to recover from financial emergencies; * repayment in installments with no prepayment penalty to enable borrowers to recover incrementally; * full consideration of borrowers' ability to repay the loan; * no use of personal check (or electronic equivalent) as loan collateral to stop punitive civil collection actions and accumulation of bounded-check fees; and to remove the fear of criminal prosecution; * meaningful limits on rollovers, extensions and back-to-back transactions to stop loan flipping; and * no mandatory arbitration clause so borrowers retain their right to sue for redress. -
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