Military Banking Rates

Predatory Lending and the Military Service Community


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predatory lending

Our nation’s men and women in uniform draw the attention of the public all across the country and the world. In general, the recognition is positive and gracious, but sometimes the attention is predatory.  Outside the gates of military installations, payday lenders are lined up to take advantage of our service members and their unique financial needs.

Predatory Payday Lenders

Payday lenders exist on the fringe of the financial services industry and offer loans to military service members who do not qualify for traditional financing from banks. While payday lenders allow individuals to receive much needed credit, the cost of the loans is sometimes exploitative and often detrimental to the borrowers’ long-term financial stability. Predatory lenders typically offer loans with fees of $10 to $30 per $100 borrowed, which is the equivalent of 182% to 910% APR.

Although intended to be short-term, the reality is that the average payday loan customer secures multiple loans each year.  This causes them to fall further behind each time the loan is rolled over and their debt continues to pile up. A Center for Responsible Lending study estimates the average payday loan borrower repays $834 for an initial $339 advance — that is $2.46 for every $1 borrowed.

Targeting the Military Service Community

Predatory lenders target the military service community because the challenges of military life creates financial stresses, while the stability of a government salary means the lenders have less risk in recouping the loan. As a result, payday lenders cluster around military installations to offer service members a quick, easy way to meet their financial needs.

The predatory targeting practices of payday lenders has reached such heights that it is not uncommon for service members to pass more than a dozen payday lenders as they come to and from base everyday. At Joint Base Lewis-McChord in Tacoma, WA, airmen pass 20 payday lenders on the three mile stretch of road leading to the front gate of the facility. Similarly, at Fort Campbell on the border of Kentucky and Tennessee, soldiers living in the nearby community of Clarksville pass 30 payday lenders on their way to the base.

The predatory practices and clustering around military installations occur across the country. The result is increased stress on the already over stressed military service community.

The Solution to Predatory Lending for Service Members

Recognizing the needs to end predatory lending in the military community, the PenFed Foundation started the ARK program to offer interest-free loans to active duty, reserve and National Guard military personnel.

ARK loans are $500 advances offered with a fee of $1 for every $100 borrowed. Unlike a predatory loan, however, if the service member comes in to roll over the loan, the ARK program provides free financial counseling to help them learn the necessary skills and knowledge to better manage their money and eliminate the need for emergency financing in the future.

The ARK loan program is offered through a network of credit unions across the country. The PenFed Foundation offers credit unions the opportunity to brand this program with their own logo so they generate support from their community and members. The Foundation provides reserves for the losses of the loans, so credit unions can provide these products that they couldn’t do otherwise.

Our nation’s military service members sacrifice everything for their country, and so it is our duty to provide them with a safer alternative to predatory lending.

Daniel Schenk is the Program Specialist at the PenFed Foundation.  The PenFed Foundation is a nationally recognized nonprofit organization working to meet the unmet needs of military personnel and their families through supporting wounded soldiers, providing financial management assistance and home ownership aid. The foundation is also the primary sponsor of the new $11 million Defenders Lodge supported by donated land from the government and financed entirely through private donations. The Pentagon Federal Credit Union covers all labor expenses for the foundation so every dollar donated goes directly to supporting its programs.  For more information on the PenFed Foundation and ARK program, visit