Saturday, August 5, 2006

Credit counselor Yolanda Dixon is familiar with payday loans. She spends a majority of her time trying to help soldiers at Fort Leonard Wood who have taken out short-term, military payday advances.

"Over the years, we've seen it growing worse," said Dixon, who works at the Consumer Credit Counseling Service in Springfield, Mo.

As we've previously reported, military payday loans cause financial problems, distract soldiers from their mission and compromise military readiness, while costing some soldiers their security clearance for reasons of financial irresponsibility.

Such quick cash lending by instant payday loan stores, often found outside military bases, is drawing increasing national attention - and appears headed for a showdown in Washington. Citing "predatory" lending practices, Sen. Jim Talent, R-Mo., has guided a bill through the Senate that would cap the annual percentage rate of loans to military personnel at 36 percent.

The payday advances industry vehemently opposes the legislation, saying it would deny military personnel an option for paying short-term bills or covering bank checks. A typical case may involve a soldier, needing cash to fix a washing machine or pay a bill, who goes to a payday store and agrees to pay $230 when he gets his next paycheck of $200, in exchange for an advance on it.

Later, unable to make the payment on this miltary payday loan, he rolls it over for another couple of weeks, as interest accumulates.

For the past decade, Dale Buckingham has warned airmen about the payday loan spiral. A retired chief master sergeant at Whiteman Air Force Base, he teaches business at two nearby colleges.

"Young folks who come into the Air Force, sometimes they get a little tight, and they go out looking at these payday loan companies - and they end up in trouble. It's a slippery slope," Buckingham said.

Talent, chairman of the Senate's naval panel, said he got involved after Navy officials told him that 5,400 sailors and Marines had lost security clearance, most of them as a result of financial problems that often begin with supposedly cheap payday loans.

"There's a tremendous abuse of servicemen and women going on," Talent said. "It's unfair to them and their families, but it's also causing a huge military readiness problem."

However, Steven Schlein, spokesman for the payday trade group, the Community Financial Services Association, said Talent's bill would jeopardize the $6 billion industry, which employs more than 100,000 people, and would also limit consumer options.

"People want two-week, low-denomination loans," Schlein said. "That's very clear - the market has spoken."

Some payday loan relief: James C. Jones has managed a Quick Cash store in St. Charles for three years, with 11 employees. The chain is based in Kansas City and has 97 of its 554 stores in Missouri. Its president also heads the payday trade association.

Given recent deployments, many military reservists seek personal loans, Jones said. One long-time customer from Creve Coeur recently worried about repaying a loan because he was about to be sent to the Middle East. Jones said that he removed interest from the amount to be repaid and that he acted similarly when the wife of an Army reservist from St. Charles was "upset because her husband had been shipped out."

But that's not typical of payday cash advance stores, said Master Sgt. Leah Caldwell of the St. Joseph Missouri Air National Guard's 139th Air Wing.

"They're kind of a scourge," she said. "You can't drive off any decent-sized military installations without there being at least eight or 10 payday lenders, so obviously they're making a mint at the expense of our military members."

Financial emergencies do arise, she said, but she urged military personnel to seek out service associations for aid.

"When the airmen are deployed, there's a loss of pay, and if the dishwasher breaks or the kid breaks his arm, if families are too embarrassed to call and say, 'Hey, Leah, this is what's going on,' so we can get them some help - they go to these lenders."

At Scott Air Force Base, with a wide array of quick payday loan stores dotting surrounding towns, Scott's Family Support Center has eight people who counsel military members. Counselor Amy Uptergrove said the use of payday loans as "a quick fix" left military personnel in a situation "very difficult to recover from."

It's an issue that won't go away any time soon. Expect the higher-ups in Washington to soon be heavily involved.

This entry was posted on Saturday, August 5th, 2006 at 11:19 am and is filed under Missouri.