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August 13, 2005

Florida attorney general targets payday loans catering to troops

Charlie Christ, Florida Attorney General joined with military to highlight the danger of high borrowing costs of payday loans and seek an alternative.
Payday loans are popular among troops stationed around the country and are very easy to obtain. However, the interest rates charged on those loans are simply horrendous. And it is legal too. Florida, for example, allows "an effective annual percentage rate of 390%". That is 32.5 percent a month. If this is not a daylight robbery, I don't know what is. Worse yet, some states have no limit at all.

Many service people and their families must rely on payday loan sharks simply because they don't have any choice. Once started, it is like a swamp. Payday loan swamp: "The practice of payday loans centers on advancing a serviceman or woman a portion or all of the amount of their upcoming salary. These loans normally require repayment at high rates within a short period of time. It is often impossible to repay the loan within a few days because most military installations pay on a twice monthly basis. Despite this, the interest continues to effectively increase and the serviceman or woman is further behind by the next payday than they were prior to obtaining the loan."

The military has gotten so concerned that it determined "that the astronomical rates charged by some have an impact on “military readiness.” The debt resulting from these loans places a service member at risk of losing their security clearance, or worst case, being discharged from the military."

So what is the solution? Zero interest loans are available from the military and alas, a consumer alert was released on June 30th, specifically for military and the families to stay away from payday loan shops. It also announced the Service members Civil Relief Act which gives active duty personnel more favorable loan repayment requirements. Finally, there is an ongoing investigation of certain payday loan providers.

Read the entire article on Florida Attorney General site.

 
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