FORT RILEY (KSNT) – Falling behind on bills, or running low on money, can be one of the most stressful moments in a person’s life. For some, when times get tough they seek the help of payday lenders that promise one thing, quick cash right when you need it.
Lamar Fisher knows that feeling, because 14 years ago, when he was strapped for cash, he got desperate.
“You try and keep up with the Jones’s, and next thing you know, you’re standing in line at a check cashing place,” Fisher said.
Check cashing places also known as payday loan businesses that give you money in advance of your paycheck, but with a catch. Since these loans are typically no larger than a $500 denomination, and are expected to be paid off in less than a month.
“That’s where a lot of consumers really dig a deep hole because now they have multiple loans out, and with the interest on both loans, you could be looking up combined over 600%,” Denise Groene, Kansas Director, Better Business Bureau said.
And that’s where the catch is, the interest rates something that might look good on paper at the time, but once you get home, reality sinks in.
“It took me maybe 6 to 7 months to get out from under that,” Fisher said.
In fact, one of the largest payday lenders in the US, Ace Cash Express has been ordered to pay $10 million from the Consumer Financial Protection Bureau, for pushing customers in to a cycle of debt.
When I asked the Senior Vice President, of Advance America he had this to say, “We think we offer a viable cost competitive option in a cost competitive market, but also one that is simple and easy to understand.”
But not everyone is buying in, even 14 states have banned the businesses.
“Obviously in Kansas that’s not the case, and I know it’s an industry they are looking closely in to,” Groene said.
It’s come to the point that the military has taken steps to protect their soldiers from becoming targets. Like Fisher who took out that loan 14 years ago, while he was serving in the military.
“They do take advantage of you, they know the fact you’re getting paid on the 1st and the 15th,” Fisher said.
To crack down on predatory lending, congress passed the Military Lending Act in 2006 that capped interest rates at 36 percent. Keep in mind, the average home loan is around 4%.
“The original rule that implemented really never specified who would enforce the law. So the answer was, I don’t think it really was.” Holly Petraeus, Office of Servicemember Affairs, Consumer Financial Protection Bureau said.
Pretty scary, given what prompted the Act was the report that showed large clusters of these businesses near military bases.
“They gathered outside gates of military installations like bears on a trout stream,” Petraeus said.
To see if that was the case, I headed to Fort. Riley, and there they were, just five miles from the base in Junction City, Kansas. When I approached all this businesses, Quick Cash responded saying, “We follow the rules set forth by the State of Kansas, the Federal Government and the Consumer Financial Protection Bureau for all products we offer in Kansas.” Matt Wiltanger, Chief Compliance Officer Quick Cash said.
All of this could soon change, if proposed amendments from the Department of Defense to the Military Lending Act go into effect, which would provide a greater limit on interest rates for service members on active duty and their dependents. But remember, it’s not just the military taking out these loans.
“What we really try to warn consumers is to read the fine print,” Groene said.
However, for Fisher and many others, that time has passed.
“It’s a bad, bad situation. I tell any soldier do not do it,” Fisher said.
So maybe that old adage has a point, if something sounds too good to be true, it probably is.
The proposed regulation on the Military Lending Act is still in comment period. Anyone has the opportunity to voice their concern until Friday, November 28, 2014