Wednesday, June 14, 2006

As consumers are being educated about payday loans in general, the Federal Trade Commission (FTC) may soon be focusing its efforts specifically on military payday loans.

While the FTC does not resolve individual consumer problems, your complaint helps us investigate fraud, and can lead to law enforcement action,” said the agency’s website, Military Sentinel, at www.consumer.gov/military.

The FTC launched Military Sentinel in September 2002 in response to the burgeoning problem of unscrupulous lenders taking advantage of enlisted men and women with military payday loans. Fraud and errant business practices can be reported on the site.

“FTC is not structured to take action for an individual case,” said the agency’s public affairs office spokeswoman, Jackie Dizdul, who handles military fraud complaints. “FTC takes companies to court to stop deceptive practices.”

The key to cracking down on such businesses is to alert the FTC by filing a complaint. Currently, the service cautions enlisted men and women against getting involved with short-term, high-interest cash loans in a story titled “Stay Away From Payday Lenders,” replete with information from Dara Duguay, Citigroup’s director of the Office of Financial Education.

The situation of armed forces personnel becoming targets for these military loans has become so insidious that Assemblyman Ted Lieu (D-Torrance) introduced Assembly Bill 1965 to protect members. AB 1965 would impose strict rules on payday loan companies that serve military personnel and prohibit garnishing of military wages or contacting superiors to obtain payment.

The bill passed the Assembly on April 27 and has been referred to the Senate Banking Committee and the Senate Veteran Affairs Committee, where it probably will be heard in mid-June, according to Sheri Pemberton, legislative director for the assemblyman. While California legislation is pending, Dizdul said consumers need to educate themselves about payday loans online.

Some suggestions the FTC offers as an alternative to the short-term, payday loans are:

• Shop carefully for credit and compare offers. Look for credit with the lowest annual percentage rate - consider a small loan from your credit union, a payday advance from your employer or a loan from family or friends.
• Compare the APR and the finance charge, which includes loan fees, interest and miscellaneous costs on credit offers to get the lowest price.
• Ask creditors their policies regarding extensions on bill payment periods - find out what they will charge in late fees or penalties for that service.
• Make a realistic budget, calculating monthly and daily expenditures.
• Avoid unnecessary purchases - even small daily items. Those costs add up.
• Build up a savings as a cushion to handle emergencies.
• Apply for overdraft protection on your checking account. It helps avoid credit problems and bounced checks. Again, ask about the interest rate or other fees attached to the service.
• Contact a local consumer credit counseling service to help work out a debt repayment plan with creditors or develop a realistic budget. Some credit unions and employers also offer this service.
• If a payday loan seems like the only feasible solution, borrow the maximum you can afford to pay back from your next paycheck with enough reserve cash to last until the next pay period.
• Never reveal credit card numbers, bank account information or Social Security numbers over the phone unless you know and trust the company and understand why the information is needed.

This entry was posted on Wednesday, June 14th, 2006 at 12:19 pm and is filed under National.