"Active duty Air Force E-4, assigned to Maxwell AFB, Ala., originally obtained a $500 payday loan with an agreement to pay back $600 in two weeks," the report described as an example. "She then took out other payday loans and was forced to do multiple rollovers on each one. To pay off these loans she contacted an installment loan company who provided her with a $10,000 loan at 50 percent annual percentage rate (APR). Total cost to pay off the payday loans was $12,750 and her total obligation to the installment loan company was $15,000. Her financial problems were a contributing factor to her pending divorce."

Military families have characteristics that can make them a market of choice for predatory lenders, the report said. Over 48% of enlisted members are less than 25 years old, most typically without a lot of experience in managing finances, and without a cushion of savings to help them through emergencies. They are on their own without the guidance or assistance of family, with perhaps their first significant paycheck. They are paid regularly and are not likely to be downsized, outsourced or to quit their employment. Also, the military culture emphasizes financial responsibility, with basic policy explicitly stating that Service members are to pay their just debts.

The report also noted that the nature of being in the military concentrates service members and, from the point of the payday and other lenders, makes them easier targets. Active-duty military are physically concentrated in and around bases, and having a clearly defined cultural identity allows some lenders to identify themselves in the virtual market place as being close to the military community.

To counter these weaknesses, the department recommended a variety of different new regulations for payday and other lenders when dealing with service members. These range from requiring "unambiguous and uniform price disclosures" on loan products to capping the APR on payday loans to service members at 36% to prohibiting the use of checks, auto titles and access to bank accounts as security for short term loans.

These would seem to open a regulatory can of worms since the military is not a banking regulator and most payday loan and similar operations are regulated at the state and local level as opposed to the federal level.

But Arty Arteaga, CEO of the Defense Credit Union Council, explained that what the military needs is for Congress to pass a law making these practices clearly illegal so that, in turn, the military can regulate service members' access to them if they are found to be breaking the law.

The military has an arm called the Armed Forced Disciplinary Control Board, which normally acts to put businesses located outside U.S. military bases off limits if they persist in breaking the laws governing military members. But this office has not been effective against payday lending in part because there are no explicit regulatory standards about payday lending to service members.

"Normally concerns are raised when a business has demonstrated practices that violate state or federal statute, and remediation involves the business curtailing these illegal practices," the DoD said in the report. "In the case of payday lending, businesses usually offer their services within the legal limits. Since the AFDCB takes on businesses one at a time, bringing a payday lender under scrutiny has been difficult if the lender is complying with the same rules as its competitors. Additionally, the magnitude of mediating with the number of outlets surrounding military installations has exacerbated the process."

Prospects for federal legislation to put at least some of the DoD's recommendations into law seem promising, according to legislative sources. The report came from legislator inquiries and lawmakers have been asking for some time why the DoD has not acted to put more payday lenders off limits. Now that the DoD appears to have given legislators a list of what it needs to help correct the problem, it seems likely that lawmakers will cooperate and fulfill at least some of the request. –[email protected]