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Navy preying on predatory lenders

June 9, 2006 - Point Loma Naval Base, California

The head of a newly-formed task force said the Navy has a different kind of enemy in its sights.

"We're going to defeat these predators and we're asking for the help of all the Sailors out there," said Capt. Mark Patton, commanding officer of Naval Base Point Loma.

Patton said the "predators" are payday loan shops and similar companies that target military members and their families.

These shops, identifiable by their big signs and attractive offers, are sprouting up all over the region outside the gates of Navy and Marine Corps bases.

Susie Y. Wong, director of communications for the California Department of Corporations, the agency responsible for the regulation of payday loan shops, explained the legal process of how payday loan shops do business.

"A customer receives a cash advance when they write a personal check that is deposited on the day he receives his paycheck," said Wong. "By California state law, the maximum amount they (customers) can take out at once is $300, and the maximum these businesses can charge is 15%." Patton said Sailors represent an opportunity for these businesses to take advantage of.

"There have always been a lot of practices that are predatory in nature against Sailors; especially younger Sailors who get a steady paycheck but come in without a lot of financial training or experience," said Patton.

"The advice we give Sailors is if it sounds too good to be true, it probably is. If it's offered to you immediately right now, you need to be questioning why that is," Patton added.

Some other examples of predatory practices include some rent-to-own organizations, furniture shops and used car dealerships that offer incredibly high interest rate loans to allow somebody to get something now.

Patton said it is crucial for Sailors to become knowledgeable about the financial resources available to them that are designed to help them out.

"Congress appropriates millions of dollars, and we have millions more in volunteer-donated dollars that are designed to help Sailors in financial need," Patton said. "It's not just for a guy in trouble; everybody ought to use these resources because they're designed to help you build a financial plan. Fleet and Family Service Centers, Navy-Marine Corps Relief Society, and several of the patriotic credit unions in the area are there to help Sailors."

Patton said these kinds of businesses are multiplying at an alarming rate.

"This is a relatively new problem, relative being within the last five years," he said. "These businesses are multiplying because they are making tremendous profits off of our Sailors. It's estimated last year that payday loans took $80 million out of the pockets of our active duty Sailors and their families. That is unacceptable."

He said that Task Force Payday Lending, which consists of officers and senior enlisted members, is gaining more and more data to realize the impact of predatory lending on military readiness.

He gave examples of these in his testimony on predatory lending in front of the California State Senate Joint Assembly.

"A service member saddled with debt, fear, and considerable stress could suddenly find his integrity compromised," Patton told the assembly. "His job performance will probably suffer, and he most likely will lose his security clearance and be temporarily removed from his assignment. Between 2000 and 2005, revoked or denied security clearances for Sailors and Marines due to financial problems have increased 1,600 percent.

"At a time when we are at war, this is an unacceptable loss of valuable talent and resources."

The fight against predatory lending involves a three-pronged strategy, Patton said.

"The first one is training; how do we get better word out to the Sailors of the dangers of these practices," he said. The second is in culture; trying to find out why a Sailor uses a predatory lending establishment over other assets like credit unions, your banks, and fleet and financial services.

"The last part is partnering with the organizations that are out there helping our Sailors on a daily basis."

Patton said one of the most important things Sailors can do to help with this problem is to be upfront about their negative experiences with loan shops or other predatory businesses.

"We need Sailors to come forward and tell us their stories of when they've been taken advantage by these organizations," Patton said. "Sometimes it's embarrassing; sometimes they may not be comfortable in doing so. But they're helping out not only themselves but their shipmates.

"We need to build more and more examples of how predatory lending is taking money out of their pockets so we can fight back."

This mission of fighting predatory lending businesses comes straight from the top.

"The CNO takes this as a very serious problem and has tasked the top leadership of the Navy with intrusive leadership to go out and turn this problem around," Patton said.

"We believe if we don't, it'll become an even bigger problem with larger military readiness impacts."

News Source

Navy Compass, JO3 Tim Wrightman, Staff Writer

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