Representing nearly every military branch, the officers testified that the financial stress of the high-interest loans could interfere with the ability of troops to concentrate on fighting in Iraq. The hearing was called by U.S. Rep. Sam Graves, a Missouri Republican.

Army Col. Michael Neer of Overland Park told Graves that military personnel had taken out an estimated 175,000 high-interest loans to make ends meet.

"This is an alarming number of soldiers and seriously imperils the operational focus of our troops both at home and away," Neer said.

Payday lenders and dozens of their employees who packed the hearing denied that they singled out military personnel or exploited their need for quick loans.

Darrin Andersen, president and chief operating officer of QC Holdings Inc. & Subsidiaries, a Kansas City-based payday loan business, said legitimate payday lenders fulfill a need, such as saving someone the embarrassment of a bounced check.

"Consumer demand for our service was created when traditional financial institutions stopped making small-denomination unsecured loans," Andersen said. He said his company and others follow a code of Military Best Practices.

But the release Tuesday of a study of 109 military bases nationwide -- including two in Missouri -- supports claims that payday lenders concentrate their operations around military bases.

The study ranked Missouri fifth among the 20 states surveyed in terms of the number of payday lenders per capita, with more than 20 per 100,000 residents. Missouri has 1,138 payday lenders, compared with 2,193 banks.

After the hearing, Graves said he would push for federal legislation to cap interest rates at 36 percent on payday loans made to military personnel. The rates now can rise to 500 percent or more on an annualized basis.

"There are some folks out there that are taking advantage of our military personnel," Graves said, adding that he did not want troops fighting overseas "to be worried about these problems back home."

Payday lenders said that the problems associated with the short-term loans were exaggerated. They said that if a cap were placed on the fees and interest rates, it would force many lenders to close.

A cap would "put them out of business. Soldiers then would have to look for more expensive options for emergency loans," said R.S. Siegfried, a retired Army officer who is co-chairman of a payday lenders trade group. "I don't think we should throw the baby out with the bathwater."

Even so, Master Chief Petty Officer John Thompson, the Atlantic fleet master chief of the Navy, testified that the Navy-Marine Corps Relief Society had seen an increase in sailors and Marines "who have problems exacerbated by predatory loan practices."

Thompson said that since 2002, the relief agency has "tracked an increase of referrals directly related to payday loan and check-cashing institutions."

Testimony indicated that laws in many states allow payday loans to be revolved over and over. In Missouri, some of those loans add up to an annual interest rate of more than 1,950 percent, officials said.

Kathleen Keest, a lawyer with the Center for Responsible Lending, a nonprofit research group, said that payday loans "are designed to trap borrowers so that they become repeat customers against their better judgment, really against their will."

Though unrelated to Graves' hearing, the national study released Tuesday seemed to rebut lender's claims that they do not focus on military personnel.

"Payday loan companies vociferously deny that they are targeting military personnel, but the numbers show that they do," said Christopher L. Peterson, an assistant professor at the University of Florida's Levin College of Law.

Peterson and Steven M. Graves, an assistant professor of geography at California State University, mapped out payday lenders across 20 states chosen, among other reasons, because they had military bases near small towns.

They found that ZIP codes near military bases consistently had higher numbers of payday lenders than nonmilitary ZIP codes of similar population and demographic makeup. They also found that in almost every state, military towns ranked among the highest in number of payday lenders per capita.

For instance, with 16 payday lenders and just more than 41,000 people Pulaski County, home to Fort Leonard Wood, ranks 11th of 115 counties in Missouri in terms of the number and density of payday lending, according to the report.

Neighboring Laclede County ranks 10th, despite its isolation in south-central Missouri.

At the ZIP-code level, the effect of Fort Leonard Wood's attraction to payday lenders is even more evident, the report said.

Although St. Robert, Mo., has only 5,200 people, it has eight payday lenders, compared with two banks. The report noted that the town has seven more payday lenders than expected, according to national averages.

"Given the number and density of payday lending for this population, St. Robert is the second-worst place in the state for this activity," the report said.

Peterson said military personnel are good clients for payday lenders because they have a steady, if low, income, can easily be tracked if they default and are governed by military laws that make it an offense if they do not repay a loan.

Troops who fail to repay loans can face demotion, loss of security clearances and even discharge. As a result, military officers said troops often are reluctant to confide their financial problems to a commanding officer.

"The military's seriousness about personal debt is a plus for the payday lenders," Peterson said. But not for a soldier, he said. "It can ruin a career."

SEEKING SOLUTIONS: A payday loan is a high-interest loan often guaranteed by your paycheck. It can be quick and easy, but it can carry big costs. When you need credit, shop carefully:

--Compare offers. Credit unions often can provide a loan at a significantly lower interest rate.

--When comparing, look for the annual percentage rate, or APR. The government requires that it be disclosed.

--A credit-card cash advance may be an alternative, though it may have a higher interest rate than other sources of funds.

--If you are facing an emergency, consider asking your creditors for more time to pay your bills.

--Being strapped for cash may be a sign that you are living beyond your means and that you are in need of credit counseling.

--If you are in the military you can seek out financial advisers who are willing to help.

--Avoid unnecessary purchases, even on small items that add up.

--Make a budget and begin building a savings to avoid borrowing for emergencies.

Sound Off...What do you think? Join the discussion.


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