PenFed Plugs ARK as DoD Rips Payday Lenders
The Pentagon Federal Credit Union Foundation, part of $16.8 billion PenFed in Alexandria, Va., talked up its Asset Recovery Kit program as the Department of Defense considers tightening rules that apply to military lending.
“We’ve heard a lot recently about service members taking out payday loans with as much as a 19% interest rate or even higher,” said Jane Whitfield, PenFed Foundation president/CEO. “High-interest loans don’t solve a military family’s financial problems, they just make them worse, so we came up with a better option.”
As part of the ARK program, qualifying active duty, reserve and National Guard personnel can borrow up to $500 or 80% of the borrower’s net pay for a flat fee of $5 and no interest for one month. Loan documentation is simple, and up to three loans in six month are available.
After the first loan, however, borrowers must meet with a local credit counselor to address their issues on a longer-term basis. The program’s goal is to rebuild or repair credit, improve cash flow and increase money-management skills.
“We don’t want to just patch over the problem,” Whitfield said. “We want to help get them out of the situation they are in and make sure they don’t just get into another one.”
Last month, the Department of Defense urged Congress to enhance legal protections for members of the armed forces, releasing a report that cited evolving predatory lending practices in the payday loan industry that circumvent the 2007 Military Lending Act.
PenFed is the country’s third-largest credit union.