Oklahoma takes action to regulate laws against high-interest lenders Published Dec. 1, 2006 By 1st Lt. Lori Wise Public Affairs Vance Air Force Base, Okla. -- The negative implications of payday lending can destroy the careers and mission readiness of Oklahoma's military members, so base legal counselors and state law makers are taking action. According to the Department of Defense, Oklahoma, Florida and Georgia recently took protective steps against payday lenders. In 2004, Georgia passed legislation eliminating payday lending from the state, while Florida and Oklahoma now require a 24-hour waiting period between payday loans to eliminate rollover and multiple loans, according to John Molino, deputy undersecretary of defense for military community and family policy. Servicemembers are attractive customers for payday lenders because troops tend to be young with limited credit options, have a steady paycheck and are obligated by the military to be financially responsible. "Our mission can be negatively affected by our members getting trapped in these types of loans, which are not an effective solution for their long-term financial needs," said 1st Lt. David Gassoway, 71st Flying Training Wing assistant staff judge advocate. Repeatedly using payday loans will likely lead to a debt trap that is difficult to escape. "Unlike other small loans, payday loans are secured by your personal check, so if you come up short when the loan is due, you will be hit with expensive non-sufficient funds charges," said Capt. Michelle Crawford, 71st FTW deputy staff judge advocate. To pay off the loan, a person may often have to sacrifice on groceries, utilities, car repairs or other basic necessities. Tech. Sgt. Tonia Elliott, 71st Communications Squadron computer systems noncommissioned officer, said one of her Airmen had a painful experience with payday loans, ultimately ending with the Airman's discharge. "My troop ran into the problem of opening several loans at one time and not being able to pay them off," Sergeant Elliott said. "Several loans were opened to cover other loans, but it all caught up with (the person who) still owes money to the loan companies. Collectors are still enquiring on (the Airman's) location to get the money owed. "This was the worst choice to fix a money problem. Always ask for help from supervisors, commanders or family support, who can help with different circumstances. Just ask, and you'll receive guidance and assistance." According to the Vance legal team, Oklahoma has no laws restricting the amount of interest a lender may charge on these loans (many loans have in excess of 400 percent interest). However, there are some things military members should know to protect themselves from falling into the pitfalls of payday loans. Payday lending was authorized in Oklahoma under the "Deferred Deposit Lending Act" that took effect on Sept. 1, 2003. Legislation has passed which makes payday borrowing less attractive to use. This legislation includes: n People may not hold more than one unpaid loan at any given time. n There is a 24-hour wait after closing a loan and opening a new loan. n Borrowers are limited to five loans in a 90-day period without obtaining consumer credit counseling. n Lenders cannot have loans outstanding to a person at any one time in a principal amount of more than $500. n The lender must provide borrowers with full disclosure of the annual percentage rate of the loan. n The lender must provide borrowers with a written loan agreement. n A lender may not enter into a renewal of a deferred deposit loan. n The lender cannot threaten criminal proceedings against borrowers to collect on the loan. The lender must collect past due accounts in a lawful manner, in accordance with the Fair Debt Collection Practices Act. Before borrowing, Air Force members could: n Ask to borrow from a friend or a relative n Consider a cash advance on a credit card n Find out if they can delay paying a non-interest bill such as a utility bill and make payment arrangements with the utility company n Ask creditors for more time to pay n Consider getting overdraft protection on their bank account n Consider a short-term loan from another financial institution or a loan payable over several months n Use Air Force Aid or counsel with Air Force finance department.