U.S. PIRG Consumer Blog: House protects soldiers from financial predators

Civil War general William Tecumseh Sherman's 19th century definition of an Indian reservation as "a parcel of land inhabited by Indians and surrounded by thieves" is an apt 21st century description of America's military bases. Underpaid soldiers and sailors and their spouses and families are surrounded by predatory lenders. Rent-to-own stores, auto title pawn shops (where your car keys are collateral for $200 triple digit APR loans), and payday loan stores litter base approaches. Some of the predators, selling tawdry under-performing insurance and mutual fund products, have even been allowed onto bases to sell their wares. After that scam was exposed in a long series beginning last summer by Diane Henriques of the New York Times, Congress decided to do something.

Yesterday, on a 405-2 vote, the House passed HR 458, which takes important first steps toward reform. If we can protect the military -- acting now as a canary in the coalmine against financial predators -- maybe next we can convince Congress, state governments and bank regulators to protect the rest of us. We also hope that the Senate will strengthen the reforms in HR 458 before passage.

The bill, sponsored by Geoff Davis (R-KY), follows on the heels of a Pentagon effort announced last week to educate service members about "loan sharks", especially payday lenders. A unique coalition of consumer groups, anti-poverty advocates, religious organizations and military relief organizations, often joined by active duty base commanders, have been fighting payday lenders and auto title pawn operators at the state level for years.

Former PIRG advocate Chris Peterson, now a law professor at the University of Florida, and a colleague, geography professor Steve Graves at Cal State Northridge, recently released a major study downloadable here (2.7 mB pdf) using geographic mapping analysis to document how predatory payday lenders target millitary families. PIRG reports on predatory payday lending here (2001 and 2000). We are watching closely the efforts of the rent-to-own boys to convince Congress to give them a safe harbor from tough anti-usury laws in several states. The Senate Banking Committee held a hearing last week on a very bad bill with too many co-sponsors. S. 603 (Landrieu-D-LA) designed to eliminate New Jersey's (and laws in Wisconsin, Minnesota and Vermont, among other states) strong protections against unfair rent to own practices. Here's our joint testimony, delivered by Travis Plunkett of Consumer Federation of America and Carolyn Carter of National Consumer Law Center, against S. 603 and a potpourri of other bad proposals. Here's PIRG's page on rent-to-own.