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Troubles on the Financial Front
by Charles Gerena

When soldiers are shipped out to war, sometimes with only a few days' notice, settling their financial affairs is probably the last thing on their minds. As a result, a checkbook and a pile of bills can suddenly land in a military spouse's lap.

That's what Stephanie Moore has seen from behind the counter of Express Check Advance, a payday tender near Naval Air Station Oceana in Virginia Beach, Va. Since the Middle East deployments began last March, Moore says the wives of Oceana personnel have been coming for advances on their husbands' paychecks.

Deployments are just one of the challenges that can compel military families to turn to payday lenders, pawnshops, and other high-cost sources of funds.

A significant number of soldiers occasionally stumble into a financial ditch, according to a July 2002 survey of 11,000 active duty personnel. About 33 percent of respondents of various ranks admitted they had bounced two or more checks, had overdue bills, or lost their utility services during the last 12 months. Among the privates surveyed, the percentage in financial distress climbs to 46 percent. Poor military pay is frequently blamed for these difficulties. Congress has approved wage increases several times, including a 4.1 percent minimum increase for 2003 and a 5.5 to 6.5 percent raise for certain mid-level personnel, but soldiers still feet underpaid. About 42 percent weren't happy with their compensation, which includes base pay, allowances, and bonuses. (A private on active duty for a minimum of four months makes a base salary of $13,800 a year, while a sergeant with two years of experience earns $19,500 annually.)

Pay levels aren't the only problem. "If soldiers don't know how to manage their money, no matter how much money you give them they are not going to manage it correctly," says Lillie Cannon of the National Military Family Association Inc., a nonprofit group that provides a variety of services for soldiers and their dependents.

In addition, the uncertainties of life in the armed forces add to the financial stresses on military families. There are married couples and single parents who "deal with all of the [financial matters] that you and I do, and they are doing it in an environment over which they have much less control,” describes Roderick Mitchell, president of the Pentagon Federal Credit Union Foundation, a financial literacy organization.

For example, Mitchell says that single parents struggle to find daycare for their children that works with their turbulent schedules. Also, "enlisted people may have a change in duty station five or six times during their career," and each move takes a financial and emotional toll on their families.

At the same time, military personnel have financial avenues available to them that civilians don't have. These include pay advances to cover relocation costs, low- and no-interest loans from relief agencies run by veterans and volunteers, and access to credit from military credit unions.

But these avenues have their limits - a pay advance is available only once, relief agencies have guidelines for awarding loans and have limited funds, and credit unions have a fiduciary responsibility to turn down borrowers with poor financial histories.

Once they reach the end of their rope, soldiers find themselves among the many consumers who turn to payday loans. "They are young, on moderate incomes, and have moderate education levels," describes John Caskey, an economist at Swarthmore College who studies consumer finance. "Payday lenders are not looking for the desperately poor, but moderate-income people with jobs who are financially stressed.”

Payday lenders offer privacy for those who worry about their superiors learning about their financial problems, which can count against them for a promotion. They also offer convenience, since they are often near a military installation.

This brings up a point of controversy. Are payday lenders preying on the misfortunes of the military? The clustering of lenders around bases would suggest that - 10 storefronts offer cash advances within a five-mile radius of Oceana.

But Vicki Woodward of the Community Financial Services Association of America, a trade group for payday lenders, argues that if the military were such an attractive market, every lender would locate a majority of its stores near a base. This is not the case with Advance America, a founding member of the group. As of April 2003, only 17 of the company's 80 Virginia stores were located in Hampton Roads, the home for 188,000 naval personnel.

Also, less than 1 percent of Advance America's total customers are military personnel, according to company records. Its share of military customers goes up in places with more bases - 1.5 percent in Virginia Beach and 10 percent in Hampton Roads. But in both cases these percentages are smaller than the ratio of each area’s military population to its total labor force.

More likely, payday lenders near bases are tapping into the broader community that includes both soldiers and civilians. "The military [presence] was not a consideration; it was the overall population," says Rob Godbey, owner of seven Cash Express locations in Hampton Roads. "We have some military that come in, but not many. They are not our focus.”

On the other hand, Tim Oldfield readily admits that his company, Cash Converters United LC, opened all five of its Virginia stores in Hampton Roads because of the region's military presence. "A base's population is transient. People are coming in and out all the time," says Oldfield, who also oversees a store near Fort Bragg in North Carolina. When soldiers are reassigned or deployed at the last minute, they can get quick cash for their belongings from Cash Converters instead of paying movers or renting storage space. Also, the company's selection of second-hand goods provides newly assigned personnel with an inexpensive way to furnish their residences.

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