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Commander, Navy Installations Command

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Danger of Payday Loans

Although the Military Lending Act (MLA) that went into effect on 01 October 2007 does its best to protect the financial interests and well being of military personnel, It is difficult to avoid the blizzard of advertisements promising money in a flash, a quick loan that offers to help with a loan to help you reach the next payday.

While these online advertisements may sound enticing to cash-strapped service members, members of the military who unwittingly find themselves in dire financial straits with so-called "payday lenders" are often surprised when their security clearances are either revoked or denied.

In fact, the number one reason Sailors are forced from one job to another is because they lose their security clearance, and the number one reason they lose their security clearances is because of financial difficulties. In 2001, Navy-Marine Corps Relief Society provided only $5,000 to 9 service members falling victim to the predatory lending industry.  In 2006, Navy-Marine Corps Relief Society provided over 1.37 million dollars to military members and/or families who were victimized by predatory lenders.  Largely because of military members who find themselves in financial difficulty, the Navy has had trouble meeting manpower needs for missions in places such as Iraq, Afghanistan, Djibouti and Guantanamo Bay. For every Sailor who drops out of a mission due to a revoked security clearance, a replacement must be found.

There remains a significant number Sailors who have fallen victim to an industry that has made it a practice to prey upon those who lack savings in the bank or a credit card to absorb unexpected expenses.  These predatory loan outlets, parked within a short walk outside the gates of our homeports, lure our Sailors with their marketing techniques and offers for quick, short-term loans to carry them to the next payday, regardless of a Sailor's credit history, but for a hefty price.

While they claim to provide what appears to be the easiest option for our Sailors to climb out of tough financial times, the fees these predatory lenders charge can add up quickly-but the lenders have an easy answer for that by offering to roll over those fees into a new loan.  In doing so, a Sailor will find paying an annual percentage rate in some cases, without exaggeration, of more than 2,000 percent.  As a result of turning toward the predatory lenders, our Sailors often end up far worse off financially than before.

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