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Ga. soldier claims he was predatory lending victim
SAVANNAH, Ga. (AP) — Army Pike Sgt. Jason Cox says he borrowed $3,000 for an emergency trip to pick up his daughter. The advance ended up costing him more than $4,000 in interest, plus a sport utility vehicle the lender seized when he defaulted.
Now the Fort Benning soldier is suing the lender in federal court, contending the interest anyhow and other terms violated a 2007 law passed by Congress to protect military employment members from predatory lending.
Cox's lawyer, former Georgia Gov. Roy Barnes, is trying to persuade a federal beak to grant class-action status because the lender, Atlanta-based Community Loans of America Inc., operates more than 900 stores in 22 U.S. states. Barnes believes numerous soldiers have enchanted out similar loans, likely without knowing the terms are illegal, though it's not clear how many.
"The rates are so lucrative for those that overlook the law," said Barnes, a Democrat who pushed a statewide crackdown on high-interest payday loans when he was governor from 1999 to 2002. Some in the military are too diligent with moves between bases and overseas deployments to bring lawsuits or complain, Barnes said.
Robert Reich, president and CEO of Community Loans of America, did not results phone messages from The Associated Press. The company has yet to respond to the lawsuit in court filings.
Cox said he was unmindful of any restrictions aimed at protecting soldiers when he walked into a Community Loans store in July 2010, needing abrupt cash to drive to Minnesota and pick up his young daughter from his estranged missus. Cox said he needed cash for gas, lodging and food, but concedes it didn't expenditure $3,000. He insisted the lender prodded him to borrow that amount at the store in Phenix Town, Ala., just across the Georgia state line from Fort Benning.
Cox pawned the title to his 2002 Plan Durango in exchange for $3,000. In the coming months, he ended up taking out new loans from the same lender virtuous to keep up with the interest. He paid interest of nearly $375 per month on total cash loans of $4,100 — an annual interest count of 109 percent.
"I was just treading water trying to stay on top of this loan and find ways to pay more on the standard. But when the interest is that high, it's really hard to do," said Cox, a 29-year-old veteran of three tours in Iraq. "For me, $375 is undoubtedly a month's worth of groceries."
Community Loans is in the business of giving car-title loans. Customers take out spondulicks loans, usually no more than a few thousand dollars, by putting up their vehicle's title as collateral. The loans are typically due in a month with annual interest rates as ear-splitting as 300 percent. If a borrower defaults, the lender can seize and sell the mechanism.
Loan transaction records filed with the lawsuit show Cox was paying interest at more than three times the top annual rate of 36 percent allowed under the Military Lending Act. The uniform said he refinanced the loan month-to-month to keep up with the high interest, which is also prohibited under the law.
The allowance documents indicate the lender also knew Cox served in the Army. There's a space on the forms that reads "ID Personification: GA, Military ID."
In August, the lender repossessed Cox's SUV. The soldier said he still owed more than $4,100, having no more than dented the principle after a year of payments.
Regulation of short-term, acme-interest loans varies by state. Congress granted special protection to military worship army members in 2007 after top commanders complained that too many in the rank-and-file were being trapped in loans they couldn't pay off, putting them at danger of losing security clearances and possibly even discipline by court-martial. Military law prohibits use members from defaulting on debt.
Military and consumer advocates said they don't be versed how many other lawsuits have been filed claiming violations of the Military Lending Act.
There's some evidence the law has worked. The president of the Armada-Marine Corps Relief Society, which gives emergency loans to service members in economic trouble, testified at a Senate hearing Nov. 3 that it now spends far less bailing out those trapped in anticyclone-interest loans.
Retired Adm. Steve Abbot said his organization spent $168,000 this year serving service members settle debt covered by the federal law, compared to $1.4 million in 2006 — the year before it took punch.
Still, Katie Savant of the National Military Family Association said it's virile to say how well the lending law is being enforced overall because that responsibility has been left to the states.
And some lenders are judgement loopholes to exploit in the federal law, offering open-ended credit that lacks a abruptly-term due date. The law specifically applies to loans that require payment within 181 days or less. Also, more usage members are getting short-term, high-interest loans online — from lenders face the U.S. and thus immune from the statute, Savant said.
Chris Kukla of the North Carolina-based Center for Guilty Lending said the military would be better served if the lending restrictions imposed by Congress applied to civilians as well.
"There are lenders still content to target the military even though the Pentagon and Congress have asked them to back off," Kukla said. "The only way you're in point of fact going to be able to protect that group is to have that protection apply across the board.