No-Interest Payday Loans Keep Soldiers Afloat

WASHINGTON – Pentagon FCU was awarded a $1.5 million grant to help it expand an innovative payday loan it is providing soldiers returning from Iraq and Afghanistan, the credit union announced yesterday. The funding from the Iraq Afghanistan Deployment Impact Fund of the private California Community Foundation will help Pentagon extend its Asset Recovery Kit, or ARK, to other defense credit unions, according to Mary Lynn Stevens, spokesman for Pentagon FCU. Under the program, credit union members are eligible for a short-term payday loan for a $6 fee and no interest. To be eligible for a second loan the members must agree to attend financial counseling. The loan–the credit union calls them short-term advances–can be for up to $500, or 80% of their net pay until their next paycheck. The innovative part of the loan is that the losses are not reserved for by the credit union, but in an account with the credit union’s non-profit Pentagon FCU Foundation. That’s because the loan would have a difficulty being approved by NCUA. Already, Pentagon FCU has shared the program with Fort Bragg FCU, Fort Stewart Georgia FCU and Fort Gordon FCU. The new funding will be used to expand to other defense credit unions and build loan loss reserves. About 1,000 military personnel have taken out ARK loans for more than $400,000 so far.