Twenty-four years old, married and struggling to make ends meet on an annual salary of about $20,000, U.S. Navy Petty Officer Second Class Jason Withrow took a second job stocking supplies at the Naval Submarine Base at Kings Bay, Ga., to add $400 a month to his paycheck. It helped, but an injury sustained in a car accident forced him to drop the job and he soon fell behind on bill payments.

An ad in the base newspaper for one of the many payday lenders located near the base got Withrow thinking that an advance on his next paycheck might be his salvation. He took out a $300 loan and agreed to pay back $390 when he got his next check, less than two weeks later. Withrow paid off that first loan but needed more and immediately took out a second loan, and a third.

“I kept it up for a couple months, then I went to another payday lender and got a check for $500. That was pretty tight. I was bouncing between the two for a while, then they both had to be paid at the same time. I couldn’t do it so I went to a third lender,” Withrow says.

In six months Withrow had borrowed approximately $1,700. Combined, he owed the three payday lenders a crushing $7,000 in interest. He had no option but to go to his command and fess up.

“I was afraid I would lose my career. If you’re in debt, they can kick you out of the Navy.”

Withrow’s commanders didn’t give him the boot; instead they referred him to the base’s Fleet and Family Support Center where civilian Larry Johnson, a financial educator, arranged an interest-free loan to get the payday lenders off the young sailor’s back, and secured from Withrow a promise that he would never go back.

“They don’t come to see me unless there’s a dire need,” says Johnson. “We try to help those individuals who are in a financial bind and make the effort to come into the office. He may come in voluntarily or his command sends him to us.

“I counsel them and, in many instances, I put them in a debt management program similar to the ones available commercially outside the base. But the Navy Federal Credit Union runs our program and it’s free.”

Paydays lenders populate the fringes of military bases across the country. Like steel to a magnet, payday lenders are drawn to the military person’s steady paycheck and the knowledge that if the borrower gets in trouble, the military might pay the loan.

The payday lenders are considered a scourge.

“If a young military person has a money problem on their mind it crowds out everything else,” says Adm. Steve Abbot, USN (Ret.). “It’s something they’re thinking about every waking moment. They’re worried their car will be repossessed, they’re behind on rental payments. It’s hard to concentrate on their job.

“That’s the major operations impact. It deters people from being productive and effective on their job and it exacerbates the financial crisis these people go through.”

Steven Schlein, spokesman for Community Financial Services Association of America, a trade association for payday lenders, says the military is pointing a finger in the wrong direction.

“They’re not getting in over their heads because of the payday lender. It’s because they’re underpaid and they’re probably not great money managers. Base commanders have always had the authority to bar military personnel from visiting any establishment outside the base. They do it with rough bars and other establishments. Our industry has said that if the military doesn’t want its soldiers to use our services all they have to do is bar them and we’d accept that.”

Adm. Abbot, who is president of the Navy-Marine Corps Relief Society, an organization that assists personnel who have financial problems, says barring personnel from payday lenders may raise legal issues. He says he’d like the states and Congress to address the situation.

“I believe each state needs to examine its own laws and the industry should be curbed. This should also be addressed at the national level because it involves military forces on whom we depend for security. These sailors and their families are being victimized and it should be regulated at the federal level by Congress.”

Schlein says military personnel aren’t being victimized or targeted by payday lenders.

“The military is just like any other customer; if they can’t make a payment they have a host of other options — banks, relatives, pawnshops — and they choose this option. So the notion that soldiers are being taken advantage of is wrong.”

But when it was pointed out to Schlein that Jason Withrow was charged 30 percent interest on his initial, two-week loan, Schlein said he was surprised.

“Generally, a $300 loan is 15 percent, $345. The standard charge is 15 percent. That sounds high to me. Actually, we are trying to be regulated. We don’t want the bad actors. We want the states to set standards. We have rules for our members.”

Throughout the military services an effort is made to provide financial education to new recruits who are often fresh out of high school. The indoctrination program at Kings Bay, for instance, includes sessions on bookkeeping, bank statements, budgeting and the importance of family communication, says Larry Johnson.

“One of the major problems we have is a lack of communication. The sailor goes to sea in the submarine and is gone for several months. He has his own checkbook, his wife has hers, and they’re bouncing checks.”

The military has an uphill battle against payday lenders. Junior personnel, especially, start at very low pay scales, but they usually need a car and they have all the temptations — computer, cell phone, stereo — of better-paid civilians. Married servicemen and servicewomen often rely on two incomes, yet many civilian spouses who lost their job during the economic downturn remain unemployed.

The Navy-Marine Corps Relief Society recently began tracking cases where it assisted personnel who had payday lender problems. In 2003, the organization issued $514,000 in interest-free loans or, in a few cases, grants to 1,280 sailors and marines. That’s up from $276,000 for 759 individuals in 2002.

That, according to Society officials, is just the tip of the iceberg because it represents only those who came to their organization, and only those who are so deep in debt that they have no choice but to seek help.

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