Thursday, August 31, 2006

400+% interest on widespread predatory loans to military families

Front Paged at Booman Tribune and ePluribus Media

You. Have. Got. To. Be. Kidding. Me.

As if being sent halfway around the world to fight for a lie and greed of the neocon war criminals without proper armor or equipment, severe cuts in veterans benefits including treatment for PTSD as well as multiple extensions of tour duty to "stay a course" that no one can even define, there is this kick in the teeth to military families who are cash strapped.

A 90+ page Pentagon report released a few weeks ago (with surprise, surprise, little to no press) titled Report on Predatory Lending Practices Directed at Members of the Armed Forces and Their Dependents shines a truly ugly light on this wonderful capitalistic society we live in where, for the glory of a buck you can screw over our military in their greatest time of need.

The report contains numerous examples of these practices, and makes some recommendations as to how to address this disgusting situation. Additionally, it contains letters from the American Bar Association and the Navy-Marine Corps Relief Society urging action in this area.

According to the USA Today article (linked above), this is a widespread problem, as this predatory lending institutions have popped up near military bases all around the country (the report has maps of six different regions where there are a large number of these institutions.

As many as one in five members of the armed services are being preyed on by loan centers set up near military bases that can charge cash-strapped military families interest of 400% or more, a new Pentagon report has found.


The report says "payday loan" stores (so named because their loans are often due on a borrower's next payday) have sprung up by the thousands around military bases and elsewhere in the past decade.

OK - so there are debt problems that would otherwise preclude people from joining the military and serving overseas. Of course, I can think of a large number of lies reasons why people wouldn't want to serve, but let's at least assume that debt is one of them. So instead of the Pentagon or military helping people pay down their debts or working out some arrangement with potential recruits (which may or may not even be feasible to begin with), we have people who are more than willing to step in.

For a huge fee. At a time in these people's lives when there are likely few other options.

Lenders typically charge $15 to $25 per $100 loan for two weeks, and most loans are extended for several weeks. The report says the average loan is $350 and has an annual interest rate of 390% to 780%. The average borrower, it says, pays back $834 for a $339 loan.

The report cites estimates 13% to 19% of servicemembers -- at least 175,000 people -- took out high-interest, short-term loans last year. It said nine out of 10 loans go to borrowers who take out five or more over a year.

And who are these people that are being targeted? Well, other than "just the military and military families", the report goes on to indicate the following:

Predatory lenders seek out young and financially inexperienced borrowers who have bank accounts and steady jobs, but also have little in savings, flawed credit or have hit their credit limit. These borrowers are less likely to weigh the predatory loan against other opportunities and are less likely to be concerned about the consequences of taking the loan.

Predatory lenders make loans based on access to assets (through checks, bank accounts, car titles, tax refunds, etc.) and guaranteed continued income, but not on the ability of the borrower to repay the loan without experiencing further financial problems.

Predatory lenders market to the military through their ubiquitous presence around military installations and/or through the use of terms to affiliate themselves with the military. Increasingly the Internet is used to promote loans to Service members.

Predatory products feature high fees/interest rates, with some requiring balloon payments, while others pack excessive charges into the product. The result of their efforts is to obfuscate the comparative cost of their product with other options available to the borrower.

Most of the predatory business models take advantage of borrower's inability to pay the loan in full when due and encourage extensions through refinancing and loan flipping. These refinances often include additional high fees and little or no payment of principal.

Predatory lenders attempt to work outside of established usury limits, either by attempting to obtain exemptions from federal and state statutes or by developing schemes designed to circumvent existing laws.

I am just speechless. But I guess when you have a "Commander in Chief" (and I put that in quotes since you can't seriously call Bush a commander or a chief) who is a military deserter, a Vice President who bravely had 5 deferments, and a slew of neocon "leaders" who care as much about the military as they do about the rest of We the People, then this shouldn't be surprising.

But it doesn't make it any less disgusting.

1 comment:

Anonymous said...

Lost labour.