Soldier Sues Predatory Payday Loan Lender
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UPDATED: Nov 23, 2011
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Jason Cox, a staff sergeant from Georgia, is suing Community Loans of America, a lender who offers a service similar to payday loans, for charging far above the allowed annual interest rate on a military loan, according to The Associated Press.
This Fort Benning soldier claims he took out a loan for $3,000 for a trip to pick up his daughter. Within a year, his loan cost him more than $4,000 in interest alone. That amount of interest far exceeds the rates allowed by measures established to protect service members from predatory lending.
But Community Loans of America knew they were sidestepping those measures. “ID TYPE: GA, Military ID” is written directly on Cox’s loan documents.
And despite his military status, Cox’s loan carried an annual interest rate (APR) of 109 percent.
To put that in perspective, according to a Federal Reserve statistical release, the average APR on personal loans in 2011 was less than 12 percent.
After defaulting, the lender repossessed Cox’s car, leaving him without a vehicle and a balance of $4,100—a balance higher than the loan principle itself after more than a year of $375 monthly payments.
The soldier’s lawyer, former Georgia Gov. Roy Barnes, believes more soldiers have been victimized by Community Loans of America, who has over 900 stores in 22 states. As a result, he is pushing to have this suit gain class-action status.
Military personnel have been common targets of predatory lenders because military law prohibits soldiers from defaulting. Consequently, lenders would charge higher interest rates to soldiers since they knew soldiers would avoid default at all costs. In order to cut down on this lending behavior, the Military Lending Act was passed in 2007.
But military advocates are unsure how effective this act has been.
Chris Kukla, a representative from the Center for Responsible Lending, feels the military would be better protected if the laws established for military personnel applied to the entire public.
He explains, “The only way you’re really going to be able to protect [the military] is to have that protection apply across the board,” as reported by the Associated Press.