On Payday, Many GIs Pay Back

Maryland is one of several states, including Pennsylvania, New York and West Virginia, that ban payday lending through small-loan or anti-usury laws.

Payday lenders have tried to get around interest rate caps and other state restrictions by partnering with banks chartered in places, such as Delaware, that don't limit interest rates and are regulated by the FDIC. But the agency last year imposed tougher rules on banks that partner with payday lenders, making it unprofitable for many to continue.

In the four years since Virginia allowed payday lending, the number of lenders has grown to about 750. Around the Norfolk Naval Station, storefront lenders proclaiming "fast cash" and "we make cash come alive!" can be found along several main drags about two miles from the main gate. They're joined by pawn shops, car title lenders and rent-to-own businesses with signs in the window offering "military credit."

The larger Hampton Roads area is home to seven of the nation's 60 largest military installations and one of the largest concentrations of payday lenders, according to a study published last year by Steven M. Graves, a geography professor at California State University at Northridge, and Christopher Peterson, a law professor at the University of Florida. Graves and Peterson concluded that it was statistically impossible for the concentration of payday lenders around military bases to be the result of random chance.

Payday lenders say they do not target military members, who contribute a mere 1.3 percent of the industry's annual revenue. On its Web site, the CFSA called the Defense Department report "nothing but a re-hash of flawed data, biased analysis and anti-business philosophy pushed by fringe activists."

CFSA spokeswoman Medsker said the Graves-Peterson study, which relied on state licensing data, did not distinguish among types of payday lenders and lumped together CFSA members, which represent about two-thirds of the industry, with non-CFSA lenders. CFSA members, Medsker said, are required to adhere to a set of best practices that include not contacting military commanders to collect debts.

Emergency Relief

Military personnel who are strapped for cash have options other than payday lenders. They can turn to relief societies that provide financial assistance in the form of grants and interest-free loans. But those agencies face restrictions on what they can provide. Defense Department surveys have also shown that members of the military find the societies' procedures cumbersome.

"There's a lot of paperwork. You got to wait. By the time you get it, you're in trouble," said Anthony Catalano, a sailor, as he was leaving a Cash Advance on Granby Street in Norfolk earlier this month.

A trip to the relief society also requires a referral from a ranking officer, whom service members often are reluctant to confide in about financial troubles.

"Most [soldiers] won't tell us. They're embarrassed. They're afraid and they won't get assistance," said retired Col. Dennis J. Spiegel, deputy director of administration for Army Emergency Relief.

"All they have to do is put a word in to your commanding officer, and that's enough to put the fear of God in you," said Matthew Hubbell, a Navy air traffic controller first class in Jacksonville, Fla. He first turned to payday lenders in the early 1990s to support his family of six after cancer forced his wife to stop working. Eventually, he found himself spending his paydays going from one payday lender to another to tend to his debts.

Hubbell finally went to his commanding officer after a payday lender threatened to contact his superiors.

"I thought it was the end of my career," he said.

His commanding officer surprised him, however, and helped him get credit counseling and a lawyer.

Hubbell is still paying off some of his loans, and his wife's cancer has returned. He's managed to keep his security clearance. But it's up for review later this year, and he's not sure it will be reapproved. Losing it could not only end his military career but also would probably keep him from getting a lucrative job in the civilian world.

"I'm not trying to tell people I'm completely blameless," Hubbell said. "I didn't realize the scope of it. It was like quicksand."

Staff writer Andrea Caumont contributed to this report.