Pay Day Loans for the Military

Since this is a military issue, I wanted to add my 2 cents.

In case you live in an affluent community, payday loans are essentially loans you get from little storefronts that spring up near every military post. You get cash in exchange for a postdated check that covers the principal, interest, and fees--with annual percentage rates of 200 percent, 400 percent or more. When the agreed upon date arrives and you still can't pay the loan, you can take out another loan to cover the check, with more fees and more interest. In this manner, many spiral downward into uncontrollable debt.

There has been some push to legislate these payday loan businesses. My opinion is that these businesses are legal and simply providing a service (loans to those with bad credit) for a fee that covers their risk. No one made that Private buy a car he couldn't afford, let his insurance lapse, and then get into an accident.

At the same time, debt hurts military readiness. So, it is in the Military's best interest to discourage the use of these loans. A recent Army Times article offers a number of useful suggestions but you have to subscribe to the print edition to view online.

The main idea is that the military provides a number of options for avoiding payday loans. Unless your children are about to starve (which shouldn't be the case because the military pays for your food and housing), DO NOT TAKE OUT A PAYDAY LOAN. At some posts, the military has given unit commanders the ability to approve interest-free loans of up to $500 on a case-by-case basis and the Pentagon Federal Credit Union Foundation is testing a low-interest payday loan and some bases.

There is little risk of losing money on these loans because the government control these guys' paychecks.

Finally, every military post has a financial readiness center as part of its community services that offers classes, counseling, and information on emergency loans.

These solutions are better than legislation. Attack the demand rather than the supply by educating and providing better options.