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."