This article first appeared December 2nd, 2004
The Puget Sound Business Journal (Seattle)
Written by: Eric Engleman Staff Writer
New military target: payday loan operators near installations
Washington regulators and consumer groups have turned
up the volume this year in challenging the Practices of
payday loan companies, which offer short-term cash
advances at high interest rates.
Now another player is entering the fray: the military.
A soon-to-be-released study is shedding new light on
the prevalence of payday lenders near military bases. At
the same time, the Navy is expressing concern about the
trouble that some service men and women are getting into
with payday lenders.
Two professors, one from California State University,
Northridge and the other from the University of Florida,
have been mapping out clusters of payday lenders near 15
military bases across the country. Their preliminary
findings for the area around the Puget Sound region's
McChord Air Force Base and Fort Lewis are dramatic.
Within a 1-mile perimeter of the bases, the ratio of
payday loan stores to bank branches is more than 2-to-1.
That contrasts sharply with the rest of Washington, where
the ratio is roughly four banks for every payday lender,
said Steven Graves, geography professor at Cal State
Northridge and one of the authors of the study.
Among other statistics in the study: One of the ZIP
codes adjacent to the bases has the highest number of
payday lenders in Washington. The study found that more
than half of the payday-loan stores in Thurston and Pierce
counties are located within three miles of McChord and
To be sure, there's no readily available data on just
how many military personnel are taking out payday loans,
which are legal and regulated in Washington. Some payday
lenders say that they aren't targeting military
communities, but rather are simply establishing outlets in
highly trafficked areas where demand exists.
But military leaders in Washington are raising red
flags about the impact of payday lenders on troops.
Navy officials in Washington called an unprecedented
meeting Oct. 27 to hash over the payday issue with key
government agencies including the governor's office, the
Attorney General's Office, the state Department of
Financial Institutions (DFI) and the Federal Trade
Commission. Other branches of the armed forces and
nonprofit groups that provide financial counseling to
military families also attended.
The Navy declined to comment on the meeting, issuing
only a brief statement that read, in part: "The Navy in
the Puget Sound area is concerned about the prevalence of
payday lending establishments and their impact on the
financial health of military service members."
Payday loans have been legal in Washington for nearly a
decade. In a typical scenario, a borrower will take out a
cash advance of several hundred dollars, giving the lender
a post-dated personal check or authorization for automatic
withdrawal from a checking account. When the next payday
comes around, the borrower can either pay the lender or
roll over the loan into a new cash advance.
The problem, say consumer groups, is the fees involved.
In Washington, a payday lender can charge 15 percent on
the first $500 borrowed. Converted into an annualized
percentage rate, or APR, that works out to be a sky-high
391 percent, according to the state DFI.
Financial counselors who work with the military say
young soldiers and sailors are a particularly attractive
target for payday-loan companies. Enlistees are often
financially inexperienced, have low incomes and need
additional cash, they say. At the same time, their
government paychecks are a steady source of repayment for
"In far too many cases, those who have gotten
themselves involved in payday loans have an extremely
difficult time extricating themselves from that
relationship," said Andy Leech, director of the
Navy-Marine Corps Relief Society in Everett, a nonprofit
group that provides financial counseling to military
personnel and their families. "These people are in a
financial death spiral."
Leech said some sailors have the false impression that
certain payday lenders are somehow officially sanctioned
by the military because they advertise in the Navy Times
newspaper. But the newspaper is published by an outside
company, the Gannett newspaper chain.
Mark Thomson, director of governmental relations for
Moneytree Inc., one of Washington's largest payday
lenders, said his company and other members of the payday
trade group Community Financial Services Association of
America (CFSA) "try to be in high traffic areas so people
who want our services have access" but said they don't
target specific groups.
He said the military makes up a "relatively small
number" of the payday industry's customers.
That said, he added, "We are in a problem-solving mode. We
don't want anyone to misuse our product, whether they're
in the military or not." Thomson touted the CFSA's
"military best Practices," which includes a wide range of
guidelines, including deferment of collections if a
military customer is deployed to a combat zone. In fact,
Thomson said he met with members of the Navy-Marine Corps
Relief Society last month to discuss best Practices. The
guidelines are not legally binding.
One manager of a payday-loan branch near McChord and
Fort Lewis, who asked not to be identified, said the
military makes up only 10 percent of her store's
clientele. She said soldiers and airmen sometimes make bad
customers because after taking out a loan they can retreat
behind the walls of their bases and are difficult to
"They think just because they're on the base, they can
be protected. No regular civilian is allowed on the base
unless you're authorized. We can't go in to see them," the
manager said. "It's a lost cause. We lose that money."
But Leech said service men and women who get in trouble
with payday loans have an "unspoken sword hanging over
their head" -- fear that the lender will contact their
"There's a great deal of nervousness on the part of a
military person about not paying their debt because of the
implications for their career, for their clearances," he
said. "Failure to pay debts demonstrates they are not
The military's growing interest in payday lenders comes
as regulators at the state DFI are ratcheting up pressure
on the payday-loan industry. In recent months, the agency
has launched a public awareness campaign about the dangers
of payday loans, tried to force more disclosure from
payday lenders, and filed charges against two payday-loan
companies for alleged violations.
About the ICFE:
The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation). The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely.
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.
The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org). CASDRAP disbanded in 2010, shortly after the web site project was completed. In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.
The ICFE is also an on-line help for consumers who spend too much. ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.
Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org. Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G, a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.