Quick cash loans defended as “necessary” for military personnel

The current state of mind among both state and Federal legislators is to be relatively lax when it comes to business regulation. That has led to certain industries thriving during the last five years. Two good examples are the petroleum industry and the payday loan industry. We all know about how well the oil industry has done, as $3 gasoline clearly demonstrates. The payday loan industry has exploded in the last five years and there are now more stores nationwide than there are fast food restaurants. The market for short term loans offered at 500% per years seems insatiable.

One thing that does concern legislators is the fact that so many payday loan stores are located near military installations. It’s one thing to take advantage of the public at large, but lawmakers don’t like it when businesses take advantage of poorly paid soldiers during wartime. This has led to Congress having some initial discussions about regulating the cash advance industry on a national basis. Congress wouldn’t pass laws that affect the industry as a whole; after all, that would be regulating business. But they are taking a look at how the industry deals with our soldiers. The House and the Senate have different bills in the works, so the specifics currently vary. Undoubtedly the law, should it pass, would dictate how long a loan can take to repay and how much interest may be charged. An annual interest rate cap of 36% has been proposed, which is the rate cap now in effect under the new Oregon payday loan law.

The industry, of course, has responded with a study put forth by the Consumer Credit Research Foundation, an industry trade group. That study defends the proximity of payday loan stores to military bases, pointing out that our soldiers are not well paid, tend to be young, and tend to have relatively thin and spotty credit reports. As such, the study suggests, the stores provide not a nuisance, but a valuable financial tool to our underpaid defenders of freedom.

The study recommends not that caps or restrictions be placed on such lending but that the military make a greater effort to educate their soldiers about the way the industry works and how to handle money. These short term loans, due in two weeks and carrying interest rates that can run as high as 1000%, are a useful financial tool if used judiciously, says the CCCF.

The military might do better to simply talk to local traditional lenders, such as banks and credit unions, to see if they might offer alternatives to payday loans to our men and women in uniform. That might be a better solution than trying to regulate the industry, which has done a pretty good job over the years of circumventing regulation. Many stores have worked around state laws regarding interest rates by simply aligning themselves with banks in other states that have no such laws. We suspect that much the same will happen should Congress pass a law regulating loans to soldiers. Assuming, that is, that Congress can actually pass a law regulating a profitable industry in the first place.

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