Editorial: Pentagon’s payday papers

Tuesday, Sept. 5, 2006 | 7:22 a.m.

A new Pentagon report says up to 20 percent of armed services personnel are falling prey to loan centers that set up shop close to military bases and charge as much as 400 percent interest on short-term or "payday" loans.

According to a story by USA Today, falling too far into a financial hole can strip military personnel of their security clearances and prevent them from being eligible for deployment. This comes at a time when the armed forces are having trouble fulfilling enlistment quotas and are struggling to adequately fill the ranks to fight the war in Iraq.

The Pentagon says "payday loan" stores - so-named because repayment often is due on the borrower's next payday - charge military personnel 390 to 780 percent in interest, and that nine out of 10 borrowers float at least five such loans a year.

Personal financial woes are especially worrisome for military personnel, the Pentagon says, because they damage morale and readiness. Financial counseling is available, but service personnel often are embarrassed to admit such debts or fear such admissions will damage their careers.

In its defense-spending bill, the Senate has called for a 367 percent cap on such loans to military personnel. Some states prohibit predatory lending aimed at military personnel, but the Pentagon reports that in many regions such loan stores are located close to military bases. Henderson and North Las Vegas - the jurisdiction close to Nellis Air Force Base - have ordinances limiting the number of such stores in their cities.

Limiting the number of stores and capping interest rates isn't good enough. The military needs to do more to encourage its personnel to seek help before security clearances are at stake and offer more workshops to service members and their families that outline the pitfalls of high-interest, short-term loans. Of course, it would be of even more help if the U.S. government paid our troops better so that many of them wouldn't have to turn to high-interest loans in the first place.