A Bush Success?

A frequent question asked around here is, "Can you name one single thing the Bush administration has done that's good for Americans?" Well, a couple of days ago, I thought I spotted one:

Extend 'Payday Loan' Protections to All Borrowers

WaPo's Michelle Singletary lays out the need for Congress to do for regular Americans what they just did for members of the Armed Forces, namely, protect them from predatory payday lenders - you know, the guys who charge 900% annual interest. Turns out, the story might be just a bit more interesting. Stay with me and I'll explain why...

I've been following these payday bastards for some time, noting how they buy legislators off and stay in business, and it's really sad how they prey on military families, especially those with a breadwinner in Iraq that are trying to get by. Extended Guard deployments are particularly brutal for those with mortgages. The payday lenders are only too happy to extend soldiers and their families with small loans that balloon astronomically if a payment is missed. The average payday borrower takes out $360 and pays back $900. Ouch.

The payday loan industry has been accused of targeting the military and causing many members of the armed forces to fall into a downward spiral of debt. It's a claim the industry rejects, arguing that military personnel account for only 1.3 percent of revenue across the industry.

However, a study released by the Defense Department found that military personnel are three times as likely to use payday loans as civilians. Such loans can be particularly problematic and career-ending for military personnel because a poor financial record can result in the loss of a security clearance or even a court-martial.

So, the 2007 Defense Authorization bill has a provision that caps interest at a max rate of 36% for "service members and their dependents." The lenders, predictably, have cried foul and are threatening to pull up stakes in military base cities, you know, the fist in the velvet glove routine. And I'm thinking, you know, this is actually a consumer victory, and like Michelle says, this really ought to be extended to all Americans, but it's a start and for once the government slapped down an evil, viscious corporate bad guy and did some good. Huzzah! Right?

I didn't quite grasp what all this was about (although the second quoted paragraph above hints at it) until I ran across this today:

Debt holds U.S. troops back from overseas duty

And there it is. The lenders apparently are interfering with Uncle Sam's ability to get more boots on the ground. We aren't looking to protect our soldiers from the legbreakers, because as it turns out, getting into serious debt can actually be a pretty good thing if you aren't looking forward to another deployment.

Thousands of U.S. troops are being barred from overseas duty because they are so deep in debt they are considered security risks, according to an Associated Press review of military records.

The number of troops held back has climbed dramatically in the past few years. And while they appear to represent a very small percentage of all U.S. military personnel, the increase is occurring at a time when the armed forces are stretched thin by the wars in Iraq and Afghanistan.

Did we just see a Bush admin success in protecting the little guy, or was this an example of sticking our troops between Iraq and a hard place? You be the judge. But any time team Bush does something that looks like a good idea, it's worth taking a good, long, second look.

•  Parasites

  36%!

  I'm open for business, kossacks, and today only can offer you the low low rate of 32.5%.

  by melvin on Fri Oct 20, 2006 at 11:15:09 AM PDT

•  Bush even screws up screwing the troops n/t

  by daulton on Fri Oct 20, 2006 at 11:20:04 AM PDT

•  Bush Success

  is an oxymoron in and of itself. If the troops were paid well in the first place these payday loan places would not be needed.

  But as has been seen the admin cut Veteran and troop benefits and pay while asking them to go and fight in wars. The result is what we see and now, since the admin tipped the bucket on this one spilling the shit all over the place they are merely covering it with lime so it doesn't stink so bad.

  by Dreggas on Fri Oct 20, 2006 at 11:24:01 AM PDT

•  I don't get it

  If these places are ripping people off, why go to them?

  Obviously the people who do are desperate. However, eliminating such services, no matter how predatory they may be, only limit people's options. That benefits no one.

  by dennisl on Fri Oct 20, 2006 at 11:24:45 AM PDT

  •  Better options

    If you look at the second story, you'll see that the military is now instituting loan programs from within the system. They're aware of the problem and working to fix it. Also, financial counseling is a burgeoning business.

    No, these payday places are real parasites that cause more damage than good. I mean, look, if you need $100 and they're the only place in town that will extend it to you, is that really a "service" when you wind up owing them $500 in a couple of months? Whatever problems people have, these scumballs just make it worse.

    by The Raven on Fri Oct 20, 2006 at 11:28:11 AM PDT

    •  I don't disagree

      Then why haven't market forces stepped in with cheaper short-term loans if these businesses are so profittable? My guess would be that the default rates on these loans is huge.

      Sure, they might make matters worse for their customers. But, I see no reason why we need legislation specifically targetting these industries, especially if the military is instituting its own programs.

      by dennisl on Fri Oct 20, 2006 at 11:34:20 AM PDT

•  Loaning money to poor people...

  ...is difficult.  They often don't have the means to pay it back.

  Lenders have to charge outrageous rates to compensate for the risks involved.  The alternative would be no loans provided to people in trouble.

  That said, these lenders often don't disclose the actual interest rate on these loans, which is dishonest.

  Payday loans don't give people poor financial records.  The fact is, they are underpaid in the first place, that's what drove them to borrow.  Wheras Chrysler Corporation can go to the taxpayers for a loan, servicemen can't.

  Blaming the lenders becuase poor people need money is like blaming vultures for roadkill.

  by ManhattanMan on Fri Oct 20, 2006 at 11:25:31 AM PDT

  •  There wouldn't be a need for such lenders

    if people were paid sustainable wages.

    by Arken on Fri Oct 20, 2006 at 11:39:12 AM PDT

•  This diary title:

  Is a classic oxymoron.

  by manwithnoname on Fri Oct 20, 2006 at 11:31:26 AM PDT

•  Will limiting the interest rate be enough?

  I think your "connect the dots" sleuthing makes a  lot of sense. The Bush Admin keeps its profile consistent of NEVER doing anything that's pro-consumer.

  In this case, I wonder how effective the cap is.  20% rates are a heavy burden...I can't imagine that 36% is that much more doable for any family except for very short-term loans.  A wonderful question to pose at a WH or Penatago press conference would be, "How many more soldiers will be eligible to server overseas due to the lower interest rate cap?"  I wager that there have been studies done on that.

  Of course, the real solution would be low-cost government-backed loans. Heck, students get a much better rate than 36%, right?  Or even better, to pay soldiers a better living wage.  One of the biggest puzzles for me is why the Bush WH has not done more to support solders and vets...

  by sawgrass727 on Fri Oct 20, 2006 at 11:41:07 AM PDT

  •  Here are the protections

    Plunkett said that what's good about this legislation is that interest is defined to include all extra charges and fees, including the sale of related products, such as credit insurance.

    The measure prohibits lenders from making loans to service members based on checks written without adequate funds in the bank. It would also bar lenders from arranging loans that give them priority to electronically access a service member's bank account or paycheck. Finally, the provision would ban loans secured by a service member's vehicle. That type of loan is called a title loan.

    So they're still a pretty raw deal, but they have more or less lost the ability to put a borrower into infinite debt. NPR did a feature on these things, interviewed a poor woman who took out $250 and wound up owing over $10,000. They're really unbelievable. Once the interest kicks in, they gotcha.

    Yes, why have they asked so much of our soldiers and given them so little in return? It's a real conundrum and puts a real question mark on people with the "I support the troops" stickers who vote Republican. Thanks for the "sleuthing" comment, btw. Now I gotta go find one of those goofy-looking deerstalker caps.

    by The Raven on Fri Oct 20, 2006 at 11:48:22 AM PDT