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Statement
of the Fleet Reserve Association
submitted
to the By Joseph
L. Barnes March 29, 2005 |
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Certificate
of non-receipt of federal funds Pursuant to the requirements of the House Rule XI, the Fleet Reserve Association has not received any federal grant or contract during the current fiscal year or either of the two previous fiscal years. Introduction Mr. Chairman and distinguished members of the Subcommittee, the Fleet Reserve Association (FRA) appreciates the opportunity to present its recommendations on the Servicemembers Anti-Predatory Lending Protection Act. Celebrating its 80th Anniversary, the Association is a Congressionally Chartered non-profit organization representing the interests of U.S. Navy, Marine Corps and Coast Guard personnel with regard to compensation, health care, benefits, and quality of life programs. Prior to addressing these issues, FRA wishes to thank Congress for the generous pay, health care and benefit enhancements enacted in recent years. Of special importance are the targeted pay increases for senior enlisted personnel, health care access improvements, higher housing allowances and additional benefits for Reserve personnel. Servicemembers
Anti-Predatory Lending Protection Act FRA commends Chairman Graves not just for reintroducing the Servicemembers
Anti-Predatory Lending Protection Act (H.R. 97), but for holding today’s
hearing to bring attention to an issue in need of Congressional action.
Recent media reports have provided vivid images of streets leading to
military bases littered with businesses offering "fast cash loans."
A visit to a Navy installation in The Seattle Post-Intelligencer recently chronicled the plight of a
Navy petty officer and her husband who committed to a loan with a 390 percent
interest rate. Repaying the first loan took a large portion of the Sailor’s
check, so she had to borrow more money to make ends meet. The cycle
continued, and as the petty officer went further into debt, subsequent loans
were accompanied with annual percentage rates as high as 650 percent. Days
before the Sailor was scheduled to deploy to the The men and women who volunteer to serve in the military often enlist straight out of high school. Understandably, they have limited experience in financial matters and on embarking for a tour in the military, must account for a number of expenses they may have never had to budget for in the past. Weekly haircuts, dry cleaning bills, and amenities such as baby wipes that are not generally issued by the military are among the new expenses. The average Seaman or Private already lives on a relatively low income and can ill-afford to be saddled with ridiculously high interest loans and other indebtedness. Unfortunately, this problem is not limited to junior military personnel. In testimony submitted to the Subcommittee on Military Quality of Life and Veterans Affairs, and Related Agencies, House Appropriations Committee, Master Chief Petty Officer of the Navy Terry Scott indicated that more senior Sailors have also fallen into financial trouble as a result of doing business with payday lenders. He also stated that while the majority of service members who fall into this trap generally accept full responsibility for their predicaments, organizations that promise easy money and dole out loans with unconscionable terms should also be held accountable as they are blatantly misleading consumers. FRA is also concerned that family members of reserve personnel who have been activated for prolonged periods of time may be tempted to do business with payday lenders. According to a report submitted by the Government Accountability Office (GAO) (GAO-03-573T), 41 percent of Reservists called to serve on active duty will absorb a reduction in pay. FRA views this problem not just as a personnel issue, but as a readiness challenge. If service members fall into debt, they run the risk of being unable to deploy. They can lose security clearances, and more importantly, will not be able to effectively focus on accomplishing their mission if consumed with concerns about indebtedness. While financial education may be a formidable option for swaying some personnel from doing business with payday lenders, setting parameters on the types of loans that can be granted to service members and their families including a cap on the maximum annual percentage rate and requiring disclosure of all terms of a loan before any agreements are signed will go a long way in protecting service members from entering into dubious financial agreements with payday lenders. Some of these companies may argue that the passage of H.R. 97 will run them out of business. If a loan agency can not operate in an ethical manner that does not involve taking unfair advantage of service members and their families, perhaps they shouldn’t be in business. Conclusion Mr. Chairman, FRA salutes your leadership in working to create a policy to hold these establishments accountable, and stands ready to assist you and your staff in working toward the advancement of this important initiative. |