Why military personnel fall prey to payday lenders


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    Installment lenders ‘to the military,’ pawn shops and car-title shops cluster in a minimall just outside the security gate at Fort Stewart Army base in Hinesville, Ga. Payday loans are banned in Georgia.

    - Mitchell Hartman

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    The Fort Stewart Army Community Service office offers emergency zero-interest loans to soldiers and their families.

    - Mitchell Hartman

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    Army Captain Brandon Archuleta commanded one hundred soldiers at Fort Stewart in the late 2000s. He’s now studying government for the Army at University of Texas-Austin. One of his toughest jobs on the base was dealing with soldiers in financial distress, and dealing with the debt collectors who were trying to find them.

    - Mitchell Hartman

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    Mark and Lisa Gerber, at home in Hinesville, Ga. Mark is an MP at Fort Stewart; Lisa is former military. They have three young children. They got into financial trouble when Mark got a base transfer and they couldn’t keep up mortgage payments on their house back in Missouri. After taking out a series of high-interest installment and internet loans (the latter fraudulent), they lost the house to foreclosure and filed for bankruptcy.

    - Mitchell Hartman

When you're in debt, one of the worst choices you can make is to take on more debt to pay your creditors, especially if it's at high interest. But that's exactly the kind of financial hole many people dig themselves into, particularly men and women serving in the military. This is such a problem that in 2007, the Department of Defense started enforcing something called the Military Lending Act to protect troops from predatory lenders. But they haven't gone away, and plenty of financially stressed troops are still falling prey to them. Mitchell Hartman from the Marketplace Wealth and Poverty Desk has been looking into this issue and he's produced a series of reports in collaboration with ProPublica.

How could all these loan stores still be peddling high interest loans given that the Military Lending Act was supposed to ban this kind of lending targeted to soldiers and their families?

Simply put, there's money to be made. Military families have a regular paycheck, though they aren't paid all that much. They have emergencies just like everybody else, and then they get deployed and can't deal with them. So they go for quick cash even if it costs a fair amount to get that cash. The Military Lending Act banned short-term loans in particular, like payday loans and car title loans. It also set an interest cap of 36 percent. The problem is lenders have figured out ways to get around that. They're doing it legally, but lending at longer terms.

Mark and Lisa Gerber have fallen for this type of predatory lending. Mark is a military police officer at Fort Stewart Army base in Hinesville, Ga., and his wife Lisa is a stay-at-home mom to their three kids. The family lives in a rundown rental off the base. They got a base transfer right in the middle of the housing crash, but couldn't rent or sell their house and got behind in the payments. They got a high interest installment loan and fell for a bogus Internet payday loan that just took their money. Then, they went for another installment loan in town that lends just to military families. Eventually, it all came crumbling down.


Read other stories from the Marketplace and ProPublica joint investigation "Beyond payday loans: Installment lending and the cycle of debt."
- Protecting troops from a different kind of harm — predatory loans
- The battle against high-cost lending to military families
- Behind the photo: The unexpected job duties of a commanding officer


What kind of help does the military offer?

The Army offers financial literacy counseling. And they offer zero interest emergency loans, which they publicize widely to the troops for situations like the Gerbers'. The problem is military members don't often want to take them. There are a lot of strings attached -- and it does involve going through the chain of command. Plus, not many soldiers want to take help from the boss. Still, the loan is helpful to some.

"I've used the Army Emergency Relief," says Mark Gerber. "We were in Hurricane Rita quite a few years ago. With the power outage, all the branches of our bank in Mississippi were destroyed. So even though the Army was paying us, it was a time where I wasn't getting any money. It helped out a lot."

"They helped pay a month's worth of bills. They gave us one big, giant check for the groceries that you could only spend at the commissary. But it was only one check. You couldn't get change back or nothing," adds his wife, Lisa. "I'm like I can't have milk for a month in the refrigerator and bread for a month." 

Can we expect to see any broader reform of high interest lending given the exposure this problem has been getting?

The military has been looking into the problem with the Consumer Financial Protection Bureau. They are going to be writing new regulations. And members of Congress want to see the kinds of limits on interest that now apply to the military extended to the whole country. Sen. Dick Durbin has introduced legislation that would extend the 36 percent rate cap for military loans to the whole civilian consumer loan market.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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