CU: Predatory lenders prey on military families

NEW YORK (12/8/04)--A credit union from Jacksonville, Fla., is one of the entities describing the perils of military families being preyed upon by predatory lenders and payday loans in an article in The New York Times (Dec. 7).

VyStar CU, a $2.8 billion credit union with more than about 323,000 members, is the only financial institution interviewed in the article, which describes a number of situations that have been encountered by members and consumer groups.

The article points out the number of payday lenders popping up near military bases (such as 200 quick-loan outlets around Virginia Navy bases in Norfolk and Hampton). It also explains how easy it was for many families to get a loan. Some, however, were hit with a 390% annual interest rate. "By contrast, a loan from a credit union would have taken several days or longer but cost no more than 18%," writes the Times.

Many families were interviewed on condition of anonymity because the military considers excessive debt a security risk, leaving a service member vulnerable to financial inducements to commit espionage. Others lost their jobs because of payday lending.

A Pentagon survey says about 7% of service members said they used payday loans in the previous year. However, the Credit Research Center at Georgetown University estimates that 2% of payday loan customers were in the military. That means of the 9 million households using payday lenders, about 180,000 were military families, which is roughly 26% of the nation's military families.

A VyStar CU executive notes that heavy debts can be distracting for people in sensitive military situations. "The last thing you want," says Ret. Navy Capt. Chalker W. Brown, vice president of the VyStar CU, "is a young sailor programming a Tomahawk missile in the Persian Gulf who is worrying about whether his car is being repossessed back home."

The article discusses problems the military has had with several lenders, including some endorsed by an influential naval figure.

Capt. Brown told the Times that by early 2003, he began to see a stream of sailors coming into the credit union to refinance loans they'd made through one of the other lenders. Many of the lender's rates were more than 30%. At least half the sailors qualified for credit union loan rates of no more than 18%, he said. "I called the state attorney general's office."

The lender in question is under inquiry in Florida and is also providing information requested by Georgia regulators.

	Resource Link
	Statement stuffer: Payday Loans: The Hard Truth About Some Easy Money