Marching Into Debt

You might think those serving in the military have enough to worry about fearing for their lives in Iraq and elsewhere. But apparently, they must fear for their bank accounts, too.

The Department of Defense (DOD) is reporting another problem that hits services members, and their families, right where it hurts: the pocket book. According to a report released in early August, quick cash loans, or, predatory loan schemes, are a prevalent problem for those in the armed services-and young enlistees with a steady paycheck are the prime targets.

First year enlisted members can make about $15,000 a year without taxes, and 48% of those enlisted are less than 25 years old. Allowances and free services like health care and shelter, can also be added to the equation.

In the report, the DOD gave an example of just one instance where an enlisted service member went into debt by taking out a “pay day” short-term loan:

Active duty Air Force E-4, assigned to Maxwell AFB, AL, originally obtained a $500 payday loan with an agreement to pay back $600 in two weeks. She then took out other payday loans and was forced to do multiple rollovers on each one. To pay off these loans she contacted an installment loan company who provided her with a $10,000 loan at 50 percent annual percentage rate (APR). Total cost to pay off the payday loans was $12,750 and her total obligation to the installment loan company was $15,000. Her financial problems were a contributing factor to her pending divorce.

The DOD also noted that “pay day” businesses are “ubiquitous” around military installations.

In Colorado, it was reported last January in the Rocky Mountain News, that “pay day” lenders had an average annual interest rate of 391%, which can spell big trouble for those who wait to pay back their loans.

In response, the DOD is claiming to have educated more than 400,000 military personnel and dependents in the art of managing finances–that is, finding alternatives to potentially hazardous lending. The DOD is also calling for lenders to disclose all fees and charges to military clients, and to do away with provisions that would inhibit legal recourse for service members.

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About the Author

Erin Rosa

Erin Rosa was born in Spain and raised in Colorado Springs. She is a freelance writer currently living in Denver. Rosa's work has been featured in a variety of news outlets including the Huffington Post, Democracy Now!, and the Rocky Mountain Chronicle, an alternative-weekly in Northern Colorado where she worked as a columnist covering the state legislature.

Rosa has received awards from the Society of Professional Journalists for her reporting on lobbying and woman's health issues. She was also tapped with a rare honorable mention award by the Newspaper Guild-CWA's David S. Barr Award in 2008--only the second such honor conferred in its nine-year history--for her investigative series covering the federal government's Supermax prison in the state.

Rosa covers the labor community, corrections, immigration and government transparency matters.

She can be reached at erosa@coloradoindependent.com.

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