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CRL Supports Dole Amendment

Friday, September 30, 2005

WASHINGTON, D.C. -- Payday lenders rip off our soldiers, sailors and aviators for more than $80 million every year, says the Center for Responsible Lending.

These military people -- young, financially unsophisticated, often strapped for cash -- are three times more likely than civilians to have used the payday lending stores that flock around the gates of military bases, according to a new report by the center, which promotes responsible lending.

Now Sen. Elizabeth Dole, a Republican from North Carolina, home to some of the nation's largest bases, proposes to help stop lenders from preying on service people.

With Sen. Richard Durbin, an Illinois Democrat, Florida Democrat Sen. Bill Nelson, Sen. Jim Talent, a Republican from Missouri, and Iowa Democrat Sen. Tom Harkin, Sen. Dole proposes amending the National Defense Authorization Act to limit annual interest rates to 36 percent on payday loans to military families. Payday lenders typically charge as much as 400 percent.

"We're proud our home-state senator is standing up for the people who keep us safe," said Mark Pearce, president of the Center for Responsible Lending, a nonprofit research and policy group based in Durham, N.C. "Payday lenders make a business of trapping our soldiers and sailors in expensive and unmanageable debt. It's time we took steps to protect people from them."

Payday lenders make two-week loans, typically for a fee of $15 per $100 borrowed. Most of their borrowers can't repay the loan in the first two weeks and wind up rolling it over for another two weeks and then yet another, paying more fees and trapping families in a cycle of debt, much like a loan shark. The average borrower, for instance, pays $800 to borrow $325.

Military families are natural targets, according to the center's report, titled "Payday Lenders Target the Military." They're concentrated around bases. Steady government paychecks are a reliable source of fees for the payday lenders. Lenders can be confident borrowers will continue to pay because military people face harsh consequences, like courts martial, for not repaying their debts. Finally, soldiers and sailors typically don't earn enough to get ahead or to spring themselves from the debt trap. The typical private first class starts at $17,000 a year.

Payday lending is rampant in the military; one in five service members have used payday lenders in the last year, according to the center's report. The Department of Defense says payday lending is one of the top ten issues facing military families.

In addition to endorsing Sen. Dole's amendment, the Center for Responsible Lending supports protecting all Americans, not just the military, from predators. To do that, it proposes a minimum loan term of three months, repayment in installments and requiring the lender consider the borrower's ability to repay before making the loan, among other changes to this predatory product.

To see the Center for Responsible Lending's report on payday lending to the military, please visit

Contact: Michael Flagg at 202-349-1862 or