WASHINGTON -- It has been estimated that payday loans cost military families $80 million in interest and other fees each year.
Young, inexperienced recruits can be easy targets for predatory lenders.
However, help is on the way from a big name at the top of the chain of command: Holly Petraeus - wife of Gen. David Petraeus, the powerful U.S. Army general, war hero, and the future head of the CIA.
Mrs. Petraeus' connection to the military began long before she met the general.
"I grew up in the military. My dad was in the army for 36 years and it's the community that I know," she told CBN News.
Now the general's wife is fighting for members of the military community. She was recently appointed as director of the new Office of Service Member Affairs in Washington, D.C. The department is under the newly formed office of Consumer Financial Protection Bureau.
Her mission is to protect military families from financial predators. It is a passion she has had since her days at the Better Business Bureau.
"I can give you an example of a young soldier we heard about who wanted to borrow $1,000. The lender was going to charge him $450 in fees and then 18 percent interest on that $1,000 loan. That's a predatory loan," she explained.
Fees for payday and other predatory loans can add up to triple digit interest rates - in some cases, even more than 1,000 percent.
Some of these lenders even go as far as trying to rent tires or hubcaps to a military family for their car.
A study by the Financial Industry Regulatory Authority found that nearly one in three enlisted personnel or junior non-commissioned officers have used payday loans, auto title loans, or other risky borrowing practices within the last five years.
Army Spc. Diann Traina's problems started while she was fighting in Iraq and took out a loan for a new car.
She didn't know that the car dealer didn't actually own the car because he had taken out a loan against his inventory.
Traina couldn't get the title to the car and when the business shut down, the dealer skipped town.
In the end Traina was left with a huge debt and no car.
"I have no doubt I was targeted because I was military," she said.
Financial Strain of Deployment
The strain of military deployments can take a financial toll on military families, making them easy prey for financial predators.
Kathy Nelson, director of the Navy Marine Corp Relief Society, said sometimes financial emergencies come up quickly and military families often turn to predatory lenders for help before thinking of a better solution.
She also said predatory lenders jump to take advantage of soldiers who lack financial maturity, especially when money is tight.
"Young people making financial decisions, many for the first time on their own, and then businesses who are happy to capitalize on that," she explained.
Military Readiness Affected
Mrs. Petraeus said she and her husband also made poor financial choices early in their marriage.
"I did make some of those decisions when I was young. My husband and I had to buy the hot sports car and spent too much money for it. And we signed for an apartment sight unseen because the brochure looked good," she admitted.
She said members of the military are targeted for other reasons too.
"One is that they have a guaranteed paycheck and, in this economy, that's something that's very attractive to all sorts of businesses," she explained.
Studies show that money problems rank as one of the top three stresses for members of the military. It ranks higher than deployments, family, and even war.
Mrs. Petraeus said that the added financial stress can affect military readiness.
"If they're preoccupied with their debts and their problems, they're not going to be able to do their job the way they need to do it," she said.
The situation is so troubling that the Defense Department recently labeled it a threat to the country's national security.
"In fact it's the number one cause now of a security clearance being revoked," Mrs. Petraeus explained.
More Safeguards Needed
In 2007, Congress passed the Military Lending Act, which established a maximum interest rate of 36 percent on payday loans for military members and their families.
Mrs. Petraeus praised that move but said more protections to safeguard military personnel are needed.
As the number of troops in Afghanistan wind down, Mrs. Petraeus' war is just beginning to heat up.
Even though her official start date at the Office of Service Member Affairs isn't until July, she is already working to make sure that those who protect the nation are protected from their financial enemies.
"A big part of my mission will be education of the military so that they don't get into some of these bad deals," she said. "And also working within this agency to make sure the military issues are on everyone's mind."
*Original broadcast June 28, 2011.