Military bases targeted by lenders

They line the streets outside every military base with bright-colored signs advertising "E-Z Cash" "E-1 and up" and "Payday Loans." But the leaders of the $25 billion payday loan industry insist they don't target military members or communities.

Now new studies show clear evidence that that's not the case. Analysis of loan-shop locations by Military Times, among others, shows a distinct pattern: Where there are military bases, there are payday lenders.

A growing number of senior military leaders and advocates call the business a threat to military families that not only targets those in uniform, but also traps them in a cycle of debt built on small loans carrying enormous interest rates.

Lenders, in response, are increasingly active political contributors, lining up powerful politicians in Washington and state capitals — and even the assistance of retired generals and admirals — to stay in business.

"I've heard increasing concern among leadership about payday loans," said Master Chief Petty Officer of the Navy Terry Scott, who complained about payday lenders in testimony before Congress in February. "The only conclusion I can come to is they are preying on sailors."

Rep. Sam Graves, R-Mo., has introduced a bill that would cap the interest rate charged on loans to service members and their dependents at 36 percent.

"A lot of people are deployed. Spouses are left back home to take care of bills, and they are being targeted by predatory lenders," Graves said.

A $25 billion business

By any measure, payday loans are one of America's fastest-growing financial businesses. Unheard of until the late 1980s, there are now at least 15,000 payday lending outlets across the nation. The Center for Responsible Lending, a group that opposes the practice, estimates payday lenders handle an annual loan volume of $25 billion.

Once a business dominated by small mom and pop storefronts, payday lending now is dominated by a handful of giant multistate operations. One example: Fort Worth, Texas-based Cash America International. With 678 loan shops across the country, Cash America issued nearly 650,000 payday loans last year, totaling more than $1.9 billion. Cash America's net revenue on those loans: $72 million, a 238 percent increase over 2003.