The military warned Wednesday that the illegal payday loan industry in Georgia is preying on young sailors and soldiers, endangering their morale and combat readiness by offering ready money at high rates that can lead to financial disaster.At a legislative hearing on the issue, Capt. John Cohoon, commanding officer of the Kings Bay submarine base, said payday lenders line the road to his base because they consider young sailors and Marines "ripe targets" for the short-term loans which pack an interest-rate wallop.
One of his sailors, Petty Officer 2nd Class Jason Withrow, said his first payday loan created a "vicious cycle" in which he had to get still more loans to keep up with the bills and paid $7,000 in interest, with still more owed, on loans totaling $2,000.
Lt. Col. Russ Putnam, a lawyer for the 3rd Infantry Division at Fort Stewart, said payday loans are a growing problem at that base, too.
"This is a readiness issue for us," he said. "The last thing any of us need is to have a young soldier who should be learning to shoot the tank gun ... be distracted by their problems with a payday loan."
Aside from the emotional stress of dealing with debt collectors, soldiers and sailors who don't pay debts face the threat of possible court martial, he said.
"When we lose those people because of payday check cashing they're as good as dead to us. They are gone," he said.
The testimony came before the state House Banks and Banking Committee, which is reviewing a Senate-passed bill that would stiffen the penalties for making payday loans -- short-term, high-interest cash advances that use a customer's next paycheck as security.
The industry makes its biggest profits when customers can't repay their short-term loan, as most can't, and have to renew them time and again.
The practice already is illegal in Georgia but the law is widely ignored because "the punishment is so weak that it's worth it to them to take the risk," an assistant attorney general, Sid Barrett, told the panel.
The committee's options include endorsing the Senate bill in an effort to put the industry out of business or drafting a new bill which would allow the industry to continue operations under new rules and regulations.
"We're looking at all of it," said Rep. Johnny Floyd, D-Cordele, the chairman.
In its final public hearing on the measure, the committee also heard from two civilians whose problems worsened after they got payday loans, but who had different beliefs about what should be done.
Sidney Hughes, a single father of two, borrowed a total $3,000 and paid back $10,000 by working two jobs, 20 hours a day.
"It's a good concept for people living check-to-check who run into a little problem," he said. But the Legislature should regulate the fees and rates, he said.
Pam Allen, who borrowed $1,000 and said she was besieged by threatening debt collectors when she couldn't pay, said the Legislature should put such lenders out of business. "I wish I had never seen the places. I would like to see them gone," she said.
The National Association for the Advancement of Colored People and AARP are among the groups pushing to put teeth in the existing ban. But one lenders' group, called the Community Services Financial Association, is pushing for permission to operate under new regulations.
"The market place says these loans are valued and are a good service to certain consumers," said Jet Toney, a lobbyist for the group.
