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Military families targeted for high interest loans

Payday loan companies — which make high-cost loans to cash-strapped people — target military members and their families, according to a study co-authored by a University of Florida law professor.

After collecting data from more than 13,000 ZIP codes across the country, the study’s authors found payday loan operations clustered in areas near military bases.

“Payday loan companies vociferously deny that they are targeting military personnel, but the numbers show that they do,” said Christopher L. Peterson, an assistant professor at UF’s Levin College of Law. “It’s sad enough to see someone get into financial trouble because someone lent him money at more than 400 percent interest. It’s even worse when that borrower is a person who is fighting to protect our freedom — someone whose career can be ruined by a loan of this sort.”

Payday loans are high-interest loans intended to tide the borrower over to his next paycheck. In a typical payday loan, a lender might give a borrower $100 cash in exchange for a post-dated check for $115. When the loan comes due, typically two weeks later, the lender cashes the check, recouping his $100 plus a $15 “lender’s fee.”

If the borrower doesn’t have enough money in the bank when the loan is due, he can always refinance — by borrowing more money on the same terms. Known as a “rollover,” this practice can quickly turn a small loan into a sizable financial obligation. Charges for payday loans vary, but a typical lender will charge around $17 or $18 for a two-week loan of $100. That’s roughly equivalent to an annual interest rate of 450 percent.

“The people who take out these loans are typically in a precarious financial situation to begin with,” said Peterson. “When people take out payday loans, they take on a debt that can rapidly turn into yet another major financial obligation — and quite often, they don’t really understand just how high the interest rate is for one of these loans.”

Peterson and co-author Steven M. Graves, an assistant professor of geography at California State University, mapped payday loan locations in 20 states, including 109 military bases.

They found that ZIP codes near military bases consistently had higher numbers of payday lenders than nonmilitary ZIP codes of similar population and demographic makeup. In almost every state, military towns ranked among the highest in number of payday lenders per capita.

“While the clustering of payday loan outlets near military bases has been well known, the Graves-Peterson study is the first nationwide study to document that payday lenders target military consumers for their high-cost, high-risk loans,” said Jean Ann Fox, director of consumer protection for Consumer Federation of America, an organization that opposes the spread of payday lending. “Hopefully, this report will lead Congress and state legislatures to enact effective consumer protections.”

Military personnel make good targets for the payday loan industry, Peterson said. Junior enlisted personnel are often in their late teens and early 20s, and have low salaries and little experience managing money. Many are also married and have families. Payroll errors are not infrequent in the military, and young families often find themselves struggling on a fraction of a normal paycheck while waiting for those errors to be cleared up.

Because the military frowns on nonpayment of debt — delinquent soldiers can face demotion, loss of security clearances, and even discharge — lenders can be confident they will be repaid.

“The military’s seriousness about personal debt is a plus for the payday lenders,” said Peterson. “It also means that a payday loan can have truly tragic consequences for someone in the military. It can ruin a career.”

To correct the problem, the authors of the study advocate a return to strict enforcement of usury laws, which ban lending at a high rate of interest. The current resurgence in payday lending began in the early 1990s, as lenders found loopholes to skirt the usury laws.

“We’re asking our soldiers to put their lives on the line for us, and in the current wartime environment, there’s a lot of incentive for politicians to show that they support the troops,” he said. “Simple enforcement of existing laws on payday lending would be unquestionably good for the troops, yet very little is being done.”

From University of Florida



The material in this press release comes from the originating research organization. Content may be edited for style and length. Want more? Sign up for our daily email.

3 thoughts on “Military families targeted for high interest loans”

  1. how much fee do you pay for payday loans? if you check out some of the fees or interest rates here http://www.moneysavingfreetips.com/no-teletrack-payday-loan.html

    Mississippi ($400, 18%)
    Missouri ($500, 75%)
    Montana ($300, 25%)
    Nebraska ($500, 15%)
    Nevada (no limit, no limit)
    New Hampshire ($500, no limit)
    New Mexico (no limit, no limit)

    75%? 25%? aren’t these too high? they are more of ripoffs!

    i wonder why these states allow such high fees?

  2. Military payday loans! The before pay check financial fiasco, is history now.

    Working under the most prestigious service of the country – military – and still struggling with ends to meet! Are finances crumbling on you? And you thinking of another job? Will it easy to maintain two jobs? How would it affect your life? Is there a guarantee that the second job will solve the financial crunch? Military payday loans can offer respite from these queries, if your cash problems are temporary.

    ‘Temporary’ is the term to concentrate when you are applying for military payday loans. Only small lived financial problems can sanction military payday loans. Urgent medical needs, several bills, and unplanned expenses which are not covered by paycheck – military payday loans are normally meant for these ‘emergency’ situations.

    Military payday loans are not very different from usual payday loans. Also known as cash advance loans, they are offered to qualified military personnel on their ability to repay the loans. For military payday loans, a borrower has to give a post dated check to the loan lender. This will authorize the lender to withdraw the amount form the bank account. The authorization can also be in the form of electronic debit. The loan lender will keep this authorization for a week which is usually the time during which the borrower can pay back the loan in cash in exchange of the original check. The borrower will then deposit the check in the borrower’s account. Otherwise, if the borrower is not ready, the military payday loan can be renewed or rolled over. The military payday loan can be extended for any time period but the loan lender receives payment for every extensions.

    Military payday loans are in fact very easy to qualify for. The first requirement with military payday loans is a current valid bank account and a regular income which being in military, you already have. A veteran or an active member both can apply for military payday loans. The loan lender can also look whether a person spouse or a family member can qualify for the loan. You might have to provide some personal information which may help in computing how much money you can take. Government identification makes it easy for military personnel to access military payday loans from any part of the world. Lenders have different policies with regard to loan lending, so they might not forward military payday loans to certain divisions of military. Military personnel can also be asked for paychecks, to see your monthly income. Because of the identification with the military, military payday loans are offered with bad credit also.

    The interest rates of military payday loans are high. The typical interest rates charged are 25-30%. This can vary from person to person depending on the circumstances. Their resourcefulness can be put to use for education, home improvement, computer financing and any other personal need.

    Military payday loans come with a downside. According to Uniform Code of Military Justice (UCMJ) Article 123a and 134, default with military payday loans is a punishable offence. There can be strict penalties including confinement, clearance, court marshal, transfer or even discharge. The consequences for military personnel are much stricter than regular payday loans.

    There is a lot of hue and cry about military payday loans. These loans are in fact used to target soldiers. Instead of fulfilling emergency needs, they are dragging them into huge debt situation. The promise of quick cash seems promising at first. In order to pay for one payday loan, you take another and eventually have so much debt to pay and that too a very high interest rate. There are astounding interest rates the debt is so high without any possibility of payment. Military payday loans are strictly meant for short term shortfall. If military personnel are not sure about their ability to repay – then it is not the course for them. There will be serious consequences on their financial position not to mention the emotional effect which affects their job productivity. In fact military personnel are the ones who are the prime targets of payday loans.

    Military payday loans have grown in popularity and that has given rise to many loan lenders offering them. On one hand military payday loans are a good way to improve finances, but they can form a debt trap if not managed well. The best military payday loans do not discriminate between military personnel and would have interest rates lower than usual payday loans. A military profession doesn’t always offer financial fulfillment like other working class. But with military payday loan, you can restore monetary concerns that sprout just before the paycheck delivers.

    For More information on Secured loans,secured personal loans,military payday loans visit http://www.easyfinance4u.com

  3. Working under the most prestigious service of the country – military – and still struggling with ends to meet! Are finances crumbling on you? And you thinking of another job? Will it easy to maintain two jobs? How would it affect your life? Is there a guarantee that the second job will solve the financial crunch? Military payday loans can offer respite from these queries, if your cash problems are temporary.

    ‘Temporary’ is the term to concentrate when you are applying for military payday loans. Only small lived financial problems can sanction military payday loans. Urgent medical needs, several bills, and unplanned expenses which are not covered by paycheck – military payday loans are normally meant for these ‘emergency’ situations.

    Military payday loans are not very different from usual payday loans. Also known as cash advance loans, they are offered to qualified military personnel on their ability to repay the loans. For military payday loans, a borrower has to give a post dated check to the loan lender. This will authorize the lender to withdraw the amount form the bank account. The authorization can also be in the form of electronic debit. The loan lender will keep this authorization for a week which is usually the time during which the borrower can pay back the loan in cash in exchange of the original check. The borrower will then deposit the check in the borrower’s account. Otherwise, if the borrower is not ready, the military payday loan can be renewed or rolled over. The military payday loan can be extended for any time period but the loan lender receives payment for every extensions.

    Military payday loans are in fact very easy to qualify for. The first requirement with military payday loans is a current valid bank account and a regular income which being in military, you already have. A veteran or an active member both can apply for military payday loans. The loan lender can also look whether a person spouse or a family member can qualify for the loan. You might have to provide some personal information which may help in computing how much money you can take. Government identification makes it easy for military personnel to access military payday loans from any part of the world. Lenders have different policies with regard to loan lending, so they might not forward military payday loans to certain divisions of military. Military personnel can also be asked for paychecks, to see your monthly income. Because of the identification with the military, military payday loans are offered with bad credit also.

    The interest rates of military payday loans are high. The typical interest rates charged are 25-30%. This can vary from person to person depending on the circumstances. Their resourcefulness can be put to use for education, home improvement, computer financing and any other personal need.

    Military payday loans come with a downside. According to Uniform Code of Military Justice (UCMJ) Article 123a and 134, default with military payday loans is a punishable offence. There can be strict penalties including confinement, clearance, court marshal, transfer or even discharge. The consequences for military personnel are much stricter than regular payday loans.

    There is a lot of hue and cry about military payday loans. These loans are in fact used to target soldiers. Instead of fulfilling emergency needs, they are dragging them into huge debt situation. The promise of quick cash seems promising at first. In order to pay for one payday loan, you take another and eventually have so much debt to pay and that too a very high interest rate. There are astounding interest rates the debt is so high without any possibility of payment. Military payday loans are strictly meant for short term shortfall. If military personnel are not sure about their ability to repay – then it is not the course for them. There will be serious consequences on their financial position not to mention the emotional effect which affects their job productivity. In fact military personnel are the ones who are the prime targets of payday loans.

    Military payday loans have grown in popularity and that has given rise to many loan lenders offering them. On one hand military payday loans are a good way to improve finances, but they can form a debt trap if not managed well. The best military payday loans do not discriminate between military personnel and would have interest rates lower than usual payday loans. A military profession doesn’t always offer financial fulfillment like other working class. But with military payday loan, you can restore monetary concerns that sprout just before the paycheck delivers.

    For More information on Secured loans,secured personal loans,military payday loans visit http://www.easyfinance4u.com

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