Cash advance loans profit lenders at our soldiers’ expense

The payday loan business is a profitable one, and like any other industry, they will tend to locate their businesses where they can make the most money. As we have mentioned before, the quick cash industry seems to be putting a disproportionate number of their stores near military bases. The reasons are simple - it’s profitable to put stores there. Most military personnel are enlisted and do not have college educations. As such, they also tend to earn a fairly small salary. And they are fairly young and likely to be starting families. All of these things add up to potential customers for payday loan stores, who thrive on lending money to people with tight finances.

Studies show that members of the military are three times more likely to take out a cash advance loan than are members of the general public, and nearly a quarter of a million services members took out such loans in 2004. California alone has some 2300 loan stores, and nearly 70 of them are adjacent to one military facility, Camp Pendleton.

The military is working on this, discussing the problem with local and national politicians. The problem is more than just the inability of soldiers to repay the short term loans that carry interest rates that average 400% per year; the problem actually affects national security.

That may sound extreme, but it boils down to this - Soldiers who require a security clearance in order to do their job are screened for potential problems, conflicts of interest and any other issues that could make them vulnerable to blackmail. One of those “red flags” is problem debt, and those who have financial troubles are often denied security clearances. In fact, last year, more than 2000 service members were denied security clearances due to financial problems.

In our current state of war and terrorism, soldiers who need clearances but cannot get them are problems for everyone. So far, it has proven difficult to regulate short term lending on a local basis. Some states, such as North Carolina, have managed to outlaw it on a statewide scale. But that just causes customers to flock to adjacent states where the laws still permit the high-interest lending.

Military officials are urging California legislators to toughen up their laws, as the state has some 10% of all cash advance stores in the United States. California’s current regulation is somewhat lax; the law, for instance, prohibits customers from having more than one advance at at time. But it doesn’t have a database, as other states do, to allow lenders to actually check to see if a potential customer has an outstanding advance.

At the moment, most Americans have high regard for our soldiers and would hate to see them undergo any additional hardship beyond fighting terrorists. But it’s far worse that an industry preying upon our soldiers can affect the security of all of us.

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