Consumer Law

Predatory Lenders Target American Soldiers

By Sam Glover

Members of the armed forces bear some heavy burdens, but those burdens don’t always take the form of terrorists and enemy combatants. In recent years, soldiers and veterans have faced plenty of adversity on the home front, too, from healthcare issues to combat pay questions.

They also face an assault from predatory lenders, which clog towns with military bases almost to the exclusion of “regular” stores that have price tags instead of installment plans.

The Huffington Post paints a picture of military bases as magnets for retailers selling everything under high-interest installment plans. Why? According to Holly Petraeus:

The thing with the military is the paychecks aren’t large, but they’re absolutely guaranteed twice a month. And the military has a culture that says “You will pay your bills.”

Plus, through a process called allotment the government will pay lenders directly. It’s basically garnishment without going through the courts.

Here’s an example of the kind of financing soldiers can expect:

Dave [ . . . ] decided to purchase a 46-inch Sanyo TV in the mall from a store called SmartBuy. The salesman told him he could easily put it on an allotment and break up the payments.

What he wasn’t told was that he would be charged an exorbitant interest rate of nearly 300 percent, forcing him to pay $3,200 over two years for a TV that could be purchased for $800 at retail price.

(photo: http://www.flickr.com/photos/catchafallingstar/4245580477/)

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Full post as published by Caveat Emptor on January 25, 2011 (boomark / email).