ALEXANDRIA, Va. – "Instant Cash. Cash by Phone. Immediate Cash!!! Loans for Military. Need a Loan?" Flip to the back of publications such as Army Times, Navy Times, Air Force Times and Marine Times and you'll find ads like this. But look inside at the editorial content of a recent edition and you'll see another headline – "Consider banks, credit unions before taking out high-rate payday loans." The article focused on a program being formed by Pentagon Federal Credit Union and the PFCU Foundation to combat payday loans that can carry interest rates adding up to 300% a year. If fundraising efforts succeed, Asset Recovery Kit or ARK will roll out in January on a trial basis. Initially the program will be open only to PFCU members. But the sponsors hope nonmembers can eventually become eligible. "We view this as a pilot," PFCU Foundation President Roderick "Rocky" Mitchell told Credit Union Times. "If it works, we want to open it to everyone. "That doesn't necessarily mean the foundation is going to do it. We'll work with other defense credit unions, especially Navy Federal Credit Union. They're in places where young people in the Navy and Marines need help. "We're interested in partnerships with everybody because this is bigger than any one group." Payday loans are a growing problem among the military, Mitchell stressed. With PFCU branches at bases from Washington, D.C., to Okinawa, "If it's out there, we've seen it – and it's gotten worse," he said. "Over the last couple years payday lenders have mushroomed around military bases like nothing you've ever seen. "It's interesting that everybody I talk to in the military knows the problem. When I talk to people in civilian life, in corporations and other places I'm going to asking for money to support ARK, they don't know what I'm talking about. They take the attitude if you have on a uniform, you don't need anything else. The government is taking care of you," Mitchell said. Mitchell explained when PFCU and the foundation created ARK one of the first people he consulted was Dr. John Caskey. Through the Filene Institute, Caskey completed what Mitchell considers one of the best studies he's ever seen on payday lending. "Dr. Caskey points out folks like our people in the Armed Services are outstanding targets for payday lenders. They have a steady job, they're hard workers, pretty much very honest people, and you can always find them," Mitchell said. "At the same time, in a lot of cases they don't make enough to make ends meet. So here you have the perfect person for a payday lender or the other things you might find, such as the rent-to-own schemes which will rent someone furniture or a television set and they end up paying two to three times what the item cost." Mitchell cited another study, this one in 1999 by the Rand Institute. That research found 65% of security clearance denials to enlisted personnel are the result of personal financial problems. PFCU has committed $500,000 to ARK loans. The foundation itself will not make loans, but will provide counseling and work with groups such as Army Emergency Relief, Air Force Aid Society, Coast Guard Mutual Aid and the Armed Forces YMCA. "In our program you'll only pay a $6 flat fee for a loan up to a $500 maximum. That compares to payday lenders who charge $16 to $19 for every $100 they loan. In Texas, for example, if you get a $500 loan you'll end up paying $90," Mitchell said. "But the key to our program is no one can participate unless they agree to financial counseling. We firmly believe if we equip our people with financial knowledge, most of them will make good decisions – or at least there won't be an excuse for making bad decisions. "If we can train young men and women to shoot sophisticated weapons and do all the things they do – and we have some phenomenal people in the military – we can also teach them the basics about finances so they don't get in trouble. We can provide alternatives." What will be the most difficult part of launching this program? Mitchell cites two things. First, raising $500,000 to match the PFCU commitment and pay for financial counselors. Second, publicizing the program. Payday lenders have their big signs at the gates to military bases. ARK needs to get the word out that there is an option. – [email protected]