SOLDIERS IN DEBT

At a time when thousands of American soldiers are facing insurgent bombs and working to rebuild Iraq, a growing number of their colleagues are staying home, not because they object to the war or because they are needed elsewhere.

Thousands of military personnel can’t be deployed because they are in debt. Congress is poised to help by passing legislation to limit so-called payday loans and military leaders are improving efforts to educate their personnel about financial management. These are steps in the right direction.

The Defense Department recently studied on predatory lending, which includes payday loans, rent-to-own agreements and car title loans among other practices that result in the borrower paying extremely high fees and interest rates often in excess of 100 percent on an annual basis. It found that 17 percent of military personnel had taken out payday loans, twice the rate of the general public. On average, soldiers paid $834 for a $339 loan.

The report, released last month, chronicles numerous instances where enlisted personnel took out payday loans for a few hundred dollars, were unable to repay the money, borrowed more and became deeper in debt. Many filed for bankruptcy, which brings disciplinary action from the military.

Under Navy rules, sailors whose debts are more than 30 percent of their income cannot be sent overseas, because their financial problems could distract them from their duties or make them vulnerable to bribery. Since 2000, the number of sailors and Marines barred from deployment because of financial problems has climbed 1,600 percent, according to The Associated Press. Security clearances were denied or revoked because of financial difficulties for some 2,000 sailors last year, and the trend is similar in other services, the AP reported.

A commanding officer in California said he has sailors doing guard duty at his base when they should be deployed to Iraq.

To stop this, the Pentagon study called for a cap of 36 percent interest on payday loans, that all fees be clearly disclosed and that a person’s ability to repay be considered before a loan is made. The Senate has already passed a measure limiting interest rates.

Presented with a bill to raise maximum interest rates on such loans in Maine last year, the Legislature asked the Office of Consumer Credit Regulation to study the situation. It found that although current law limits annual interest rates on loans of less than $2,000 to 30 percent, fees can raise the interest rate to 500 percent on very small loans for short periods of time.

Like the Pentagon, the consumer credit office suggests better education and efforts to guide borrowers to lower-cost lenders such as credit unions and banks.

Teaching financial management to soldiers will help. Tighter regulation of predatory lenders will help even more.