The following story has been reposted in partnership with The Dylan Ratigan Show's week long "No Way To Live" series on the financial crisis and its impact on ordinary Americans, and in collaboration with Meetup.com, which is hosting HuffPost Mortgage Modification Madness Meetups across the country, where homeowners can meet others who've had similar difficulties with lenders.
LAWTON, Okla. - Just outside the front gates of the sprawling Fort Sill military installation, in a scrubby corner of the windswept Great Plains, a panorama of "military loan" brokers, pawn shops and car stereo dealers awaits.
In this landscape of high-interest, easy credit, Mike, a U.S. Army Private First Class from Kansas, began a downward spiral into debt -- one that has left him sleeping in his friend's garage, surviving on only $148 every month.
Recently he was reprimanded for not getting his required military haircut. He just didn't have the money, he said.
"I was actually debt-free my entire life, until I joined the Army," said Mike, who, like most soldiers at Fort Sill, spoke on the condition that he be identified only by first name because he is not allowed to speak to the media without clearance from superiors.
When President Obama offers his State of the Union address Tuesday night, he plans to discuss the welfare of the nation's troops returning home from conflict overseas. But also of significant concern are the conditions facing American soldiers right here in the U.S.
Most American military posts are encircled by an array of questionable lending operations that many consumer advocates describe as being predatory. The issue has received greater attention this month with the announcement that Holly Petraeus, wife of Army General and top Afghanistan commander David Petraeus, will lead a newly created division of the Consumer Financial Protection Agency aimed at curbing such practices directed toward military service members.
A street near the main entrance to Fort Sill
Outside seemingly every military post across the country, scenes such as in Lawton are familiar: car dealerships, cash advance businesses, furniture stores and electronics dealers all offer a tantalizing array of buy now-pay later options, marketed in particular to young soldiers who have little in the way of savings and either bad or non-existent credit histories.
"The thing with the military is the paychecks aren't large, but they're absolutely guaranteed twice a month," Petraeus told HuffPost. "And the military has a culture that says, 'You will pay your bills.' Definitely troops are well-aware of that, and they're afraid of the consequences if they don't. So that gives real leverage to lenders who will sometimes threaten them, or take advantage of their fear of getting in trouble with their units."
In addition, lenders are able to rope soldiers into firm commitments to pay obligations through a system known as an "allotment," where the payments are directly drafted to lenders from the government before ever reaching the soldiers' bank accounts.
For additional security, most lenders require soldiers to provide contact information for a drill sergeant or battery commander, in the event that a payment doesn't go through or a soldier defaults.
"Army guys -- it's the best bet," said Bailey, a first-year private who was surveying the lot at Patriot Auto Sales, just outside the post entrance on Fort Sill Boulevard, on a recent Friday afternoon. "That's a guaranteed paycheck that's not going down. If you could get $400 a month, guaranteed, why wouldn't you go after us?"
Predatory lending and high-interest financing targeting the military have been elusive problems for years. Consumer advocacy groups for years have sounded the alarms calling for greater protections. At the behest of Congress, the Department of Defense released a report in 2006 that documented how high-interest lenders set up shop outside of military towns, leading many soldiers into debts they could not handle.
The report noted that predatory lending "undermines military readiness, harms the morale of troops and their families, and adds to the cost of fielding an all-volunteer fighting force."
For soldiers who fall prey, the consequences extend beyond financial hardships. Outstanding debts or bad credit can lead to a revocation of security clearances, because a service member could be viewed as susceptible to bribes from foreign governments. According to the 2006 Defense Department report, there were 17 times as many denied security clearances due to financial problems in 2005 as there were five years earlier in the Navy and Marine Corps.
After the report, Congress eventually passed legislation that capped yearly interest rates for certain types of loans at 36 percent. But the rules only covered a portion of the lending methods available to military personnel -- payday loans, auto title loans and refund anticipation loans, which are high-interest loans based on the expected proceeds from an income tax return. Outside non-profit groups who assist service members say that many lenders have simply changed the terms of the loans, such as extending the repayment deadlines, to not fall under the new rules.
In a letter to the Treasury Department last year, a senior Defense Department official, Clifford L. Stanley, wrote that worries about finances were "second only behind work and career concerns and ahead of deployments, health, life events, family relationships and war/hostilities."
In many ways members of the military -- particularly young enlisted personnel who lack formal college education -- are similar to other low-income populations who fall victim to the temptations of risky financial obligations.
"It's not a lot different from public benefits recipients, who also are attractive targets to these lenders because they have that check coming in regularly, but have a hard time making ends meet," said Lauren Saunders, an attorney at the National Consumer Law Center who has followed military issues for years.
Although all branches of the military have stepped up financial education for soldiers in recent years, some complain the classes often come in the midst of a dizzying and exhausting training regimen.
Younger soldiers fresh out of basic training find themselves on their own without supervision for the first time in their lives. Flush with what may be the biggest paycheck they've ever seen, soldiers are tempted to spend. But lacking any credit history, installment loans at high interest rates are often the only option.
In Lawton, nestled in a rugged corner of southwest Oklahoma at the base of the Wichita Mountains, the options abound.
Situated 90 miles away from Oklahoma City and more than a three-hour drive from Dallas, Lawton sits in a vast expanse of yellow prairie pockmarked with the occasional cedar or oak tree. Fort Sill is among the nation's oldest military installations, originally built as an outpost to protect remote settlements in Texas, Oklahoma and Kansas during the Indian Wars of the late 1800s.
Lawton is a truly remote place, giving its lenders a hold on the military families and veterans who populate the area.
In contrast to the uniformity and order on post at Fort Sill, where red Spanish tile roofs and white stucco buildings line the roadways, outside the gates is a dowdy collection of car lots and strip shopping centers filled with payday loan shops and cash advance businesses.
It's a town where everything is designed on installment plans, from rent-to-own furniture stores to two-year financing plans for TVs and Xboxes.
Signs boast of "Easy Car Credit," "Special Financing," "Magic Credit" and "Military Loans."
At Cache Road Credit Auto, a lot perched along Lawton's main commercial strip, a sign simply reads "Approved," with a check mark beside it.
In the section of town closest to Fort Sill, the number of cash advance, payday loan and installment lenders easily doubles the number of traditional banks. Only churches appear with more frequency.
It remains chiefly a military town. More than 20 percent of the city's workforce is in the Armed Services, and the reach of former and current military members is evident. Look no further than the influence of female Korean business owners, for example, many of whom run the town's bars, restaurants and businesses after returning home with soldiers who deployed to Korea, beginning with the Korean War and continuing through the decades afterward.
Lawton is home to large populations of soldiers going through basic training, and it also serves as the main training ground for Army and Marine Field Artillery units, bringing a fresh crop of hundreds of new soldiers through each year.
Private First Class Mike was one of those new faces when he first arrived at Fort Sill in 2008.
The product of a foster home in Kansas for most of his childhood, he was looking for steadier pay and some professional grounding. Most of his teen years were spent working at a Sonic fast-food restaurant and a meat processing plant, inspecting cuts of beef as they traveled along conveyor belts.
By early 2009, after he'd completed training, Mike was deployed to South Korea. There, he mostly conducted field artillery training exercises, firing cannons, rockets and missiles into remote mountain areas.
Upon his return to Oklahoma at the end of 2009, he decided to marry his girlfriend of three years. Having relatively few obligations overseas in Korea, he decided to take on the obligations that come with domestic life: he took out a loan for a new Toyota Corolla, found an $800 per month apartment and financed a set of bedroom furniture from a local store specializing in monthly installment payments.
Though his past credit history was spotty, each business was happy to put him on an installment plan -- as long as he promised to put them on the allotment system that would transfer the money directly to the businesses each month. Each of the interest rates was high: the car, nearly 20 percent; the furniture, 25 percent each year.
Then the unexpected struck. Mike found out his wife had been cheating on him while he was in South Korea, and had continued to do so. They separated; she took the car and furniture, leaving him with the payments. And because he was still married, nearly a third of his paycheck -- about $600 -- had to be allotted to his wife, per Army regulations.
Quickly he was underwater. His wife wasn't pitching in on any of the costs, so he had to take out a cash advance loan at more than 20 percent interest to cover rent until his landlord could find another tenant. That required another allotment, cutting deeper into any discretionary funds to put food on his table -- and making it even tougher to afford feeding his dog.
Subtracting all the money that goes to his debts, he's left with $148 each month for food.
Just last month, he got reprimanded for not having his hair cut to the required length. Other costs got the best of him, he said.
"Sometimes other things pop up randomly," he said. "I might need to get more razors one week, or a new stick of deodorant."
Because he was technically still married, on-post housing wasn't an option, so he ended up moving in with his friend, Dave, a specialist, one rank higher than him. Since last fall, Mike has been sleeping in a bunk bed in Dave's garage, next to where the barbecue grill is stored.
There's a space heater for milder nights, but during a recent spate of single-digit temperature nights Mike has ventured back inside to the couch. Once his first cash advance loan is paid off, he'll take out another to pay for the divorce proceedings, which he said will end up easing the burden by requiring his wife to pay off a portion of the car and furniture payments.
Still, he decided to re-enlist for another two years, through 2013 -- a decision made more out of necessity than desire.
"I really don't have a choice in the matter," Mike said. "I have to basically ride it out, just wait until all the payments are paid."
Mike's friend-turned-landlord, Dave, ran into similar problems last year when he decided to purchase a 46-inch Sanyo TV in the mall from a store called SmartBuy. The salesman told him he could easily put it on an allotment and break up the payments.
What he wasn't told was that he would be charged an exorbitant interest rate of nearly 300 percent, forcing him to pay $3,200 over two years for a TV that could be purchased for $800 at retail price. SmartBuy was eventually placed on Fort Sill's list of "off-limits" businesses for soldiers, and the New York Attorney General's Office is suing the company and its affiliates for deceptive marketing practices.
An employee listed at the phone number for SmartBuy and its affiliates in Fayetteville, N.C., said the company declined to comment on the allegations.
The company had stores stationed outside of numerous military posts across the country, including outside of Fort Bragg in North Carolina, Fort Hood in Texas, Camp Pendleton in California and Fort Carson in Colorado. The store in Lawton, and several other locations across the country, have closed since the Attorney General's investigation was announced.
Dave has continued to pay off the charges, worried that the store would call his drill sergeant if he failed to pay the debt.
"If the company calls him and says you're in debt, you're going to get yelled at," Dave said. "And the number one goal in the Army is not getting yelled at."
Several of the companies in Lawton are stores that have cropped up around installations across the country. USA Discounters, a furniture store that sets up installment payments averaging about 24 percent annual interest, has locations in malls and strip shopping centers exclusively outside of military posts. An advertisement on their website reads, "If you have had past credit problems of past bankruptcy, USA Discounters is here to help you. Military and Civil Service employees automatically approved."
A spokesman for USA Discounters did not return a phone call and e-mail seeking comment.
Harris Jewelry, which has a store at the Central Mall in Lawton, stresses that the store "strives to be the premier jeweler for Active-Duty Military Personnel worldwide." The website features images of soldiers in uniform kissing wives and girlfriends, and boasts that military members are "entitled to purchase quality jewelry on credit terms specifically created for their needs."
On a recent Saturday afternoon at Lawton's Central Mall, employees for the jewelry store were stopping anyone with buzz cuts who walked past the door. Austin, a second-year private who was smoking a cigarette outside the mall entrance, said a salesman for the jewelry store was driving him hard to buy a diamond necklace for his mother. "They told me it was a way to build credit," he said.
He worked out the math and realized he would be paying nearly $1,000 in interest over four years - $64 per month over the course of the repayment.
Despite the advertisements linking the store to the military, Harris Jewelry store manager James Jirtle maintained that the military was just one of many markets the store was targeting.
"We've got a mixture of people who have no credit, to the people who invented credit," Jirtle said. "Anyone that walks past the front of our store is our target market."
Managers at the cash advance and installment loan businesses around Lawton also defended business with the military, saying that allotments are often the only way to ensure they can get paid by transient soldiers who may get moved or deployed.
"Nobody's a sure bet," said DeDe Welch, a manager at Sooner Finance, which is within blocks of the main entrance to Fort Sill. "They're not any different from civilians. And no one forces you to walk in here. I'm not holding dollar bills and waving them in the street. You have to make the decision to come into this parking lot."
Maryann Casiano of Ardmore Finance Corporation, one of three loan shops in the five-store Cache Road Plaza, added: "If they could get a loan elsewhere from a bank, they would."
All branches of the military have stepped up financial training for young soldiers in recent years, often requiring lengthy classes warning soldiers of the pitfalls of certain obligations. There are also relief societies that have been set up to front soldiers smaller, no-interest loans to relieve them of higher-interest entanglements.
Many of the more than two-dozen soldiers interviewed around Fort Sill said they had taken the lessons to heart. Bryant, a second-year private who was shopping at the mall recently, said many of his superiors have advised going two to three towns away when looking to finance any major purchases, such as a car.
"For any financial stuff, I just don't even deal with anyone in town," he said.
But he and others noted that the Army is often slow to respond to problems, declaring businesses off-limits only after there have been a slew of soldiers that have been caught up in a scam.
A public affairs officer for Fort Sill did not make financial training personnel at the post available for comment after requests over the past two weeks.
Youth and inexperience are significant factors. Dave, who got caught up in the television scam from SmartBuy, said no amount of coursework can overcome the rush of a first paycheck.
"If you're a 17-year-old and you get a $2,000 bonus, and your commander says, 'Don't go buy a car, you can't afford it.' What's a 17-year-old going to do?" he asked.
Patrick, a field artillery officer who has overseen scores of young trainees over the years -- and also scores of financial woes -- said that failure is a difficult thing for many soldiers admit.
"The Army is very strict when it comes to indebtedness," Patrick said. "It's a values-based organization. We have a very strict sense of personal responsibility. And these places prey on those same values.
"It's very difficult to go up to your boss and say, 'Hey, I messed up.'"