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When I served in the U.S. Army many, many years ago there were always predators that wanted to separate me from my hard-earned cash.

Outside the front gate of Fort Campbell, Kentucky is U.S. Highway 41A. In the stretch that runs from Oak Grove, Kentucky all the way down to Clarksville, Tennessee were seedy bars, strip clubs, tattoo parlors (before they were popular), pawn shops, electronics stores (with finance plans), rent-to-own shops, and disreputable used car dealerships. The only goal of these establishments was to take a soldier’s money. Now, I was no angel back in those days and I am sure I spent my fair share of money in some of the seedier establishments; however, the really bad ones were off limits. These were normally the used car dealerships, the rent-to-own stores, a couple bars, and the electronics stores. If you went to one of these establishments and it was discovered you were there—well, let’s just say things would not be pleasant for you.

Today, the old predators are still there, right next door to the new predators: payday loan and title loan companies.

Seven years after Congress banned payday-loan companies from charging exorbitant interest rates to service members, many of the nation’s military bases are surrounded by storefront lenders who charge high annual percentage rates, sometimes exceeding 400 percent.
Congress bans these companies ... but, as usual, Congress did not go far enough:
[T]he law has defined the types of covered loans so narrowly that it’s been all too easy for lenders to circumvent it
What can happen to a soldier caught up in the nightmarish cycle of payday loan? They can lose their security clearance and/or they can get an Article 15 (which can make debt problems even worse as it can take pay as well as tack on extra duty).

These parasites get around the laws by extending the terms on the loans, ignoring the fact that the person taking the loan out is in the military, and even going as far as claiming that:

“The soldiers sold their vehicles to the company while retaining the option to buy back the cars—for a higher price.”
Right, I am going to sell you my car for $5000 and then buy it back for $10,000, seriously? Luckily in 2012 a judge rejected that argument.

We owe it to our soldiers to stop these parasites who have become the camp followers of today. First, give our sailors, soldiers, airmen and marines a raise so that none of them need to be on food stamps, or other aid (which is why many troops end up having to go to these parasites). Second, ban these predatory parasites out of existence. Payday loans, title loans, or any other product that has an exorbitantly high interest rate should be regulated out of business.

Originally posted to Daily Kos Labor on Fri May 17, 2013 at 02:02 PM PDT.

Also republished by Badger State Progressive and Democracy Addicts.

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Comment Preferences

  •  Look, no soldier or sailor has to (0+ / 0-)

    do business with these companies. But OTOH who are we to decide for these adults whether or not they should be borrowing money from payday lenders? You could just ban the practice completely, taking away the right of the least credit-worthy American adults to avail themselves of credit. Or you could accept that in a free society, people can be free to borrow money at high rates if they wish (as long as the terms are disclosed up front of course). Personally, I don't like to be told what I can do and can't do by the government when it is a personal decision that only affects me, so I'd opt to have these businesses allowed to exist.

    •  How is a law against excessive interest different (3+ / 0-)
      Recommended by:
      lyvwyr101, Odysseus, The Marti

      than any other business regulation we have in place?

      •  Well, the problem comes in defining (0+ / 0-)

        "excessive". An interest rate of over 20% sounds excessive when the prime rate is 3%. But payday lenders, since they lend tiny amounts that they lend for very short periods (but have fixed costs), may have to charge $10 to give you an $80 advance on your paycheck for a week (for example). The implied interest rate looks like it is over 500%. But what really is happening is a small business (payday lenders are mostly small businesses) is charging $10 to someone for the convenience of getting their $80 a week early. The payday lending industry, for all this talk of predatory lending, are used over and over again by people who from time to time have a cash crunch. If an adult American wishes to pay a high interest rate for a tiny, short-term loan, I don't see how we justify telling them they are no longer allowed to.

        •  Payday lenders are not... (4+ / 0-)
          Recommended by:
          lyvwyr101, Mortifyd, The Marti, burlydee

          ...small businesses. They are large companies that make their money off charging absurd interest rates.

          "Republicans only care about the rich" - My late Father (-8.25, -7.85)

          by Mark E Andersen on Fri May 17, 2013 at 03:51:00 PM PDT

          [ Parent ]

        •  There are other business models. (1+ / 0-)
          Recommended by:
          The Marti
          (but have fixed costs), may have to charge $10 to give you an $80 advance on your paycheck for a week (for example).
          One question is why the payday lenders have those fixed costs in the first place.  Certainly the short duration has something to do with it, but it's not at all clear that is a determinative requirement.

          Given that many clients are repeat clients, it might make sense to move to more of a credit card model.  Pre-clear the borrower for a given small amount, and cut out the origination expense on every loan.

          There's no reason why any business model has to have high overhead.  Cut the overhead to the minimum necessary.

          -7.75 -4.67

          "Freedom's just another word for nothing left to lose."

          There are no Christians in foxholes.

          by Odysseus on Fri May 17, 2013 at 07:08:51 PM PDT

          [ Parent ]

          •  Everyone here things it is oh so easy (1+ / 0-)
            Recommended by:
            Odysseus

            to run a lending business in which the borrower is charged much less. Yet not one person ever says "hey, I think I'll actually do this." If it were so easy, somebody would do it. But while saying in a blog that every lender is greedy IS easy, actually doing better than them, for some reason, is apparently impossible. Just once, instead of endless griping, I'd like to hear someone here actually do something they think is so simple.

            •  You realize... (1+ / 0-)
              Recommended by:
              ruleoflaw

              ...that you are standing up for parasites right? The people that own and run these places are scum.

              Want to know why most people would never open a payday lending store? It isn't because it is difficult or hard, it is because most of us have a conscience.

              "Republicans only care about the rich" - My late Father (-8.25, -7.85)

              by Mark E Andersen on Sat May 18, 2013 at 04:02:54 AM PDT

              [ Parent ]

              •  Instead of actually having facts, (0+ / 0-)

                all you have said here is that these people are scum and parasites and predators that charge much too much for their services. You don't seem  to even want to try to discuss the facts of the business, or explain why you don't take the opportunity to run the first ever low-cost payday lender. You'd help so many people, and make a lot of money yourself, so why not? Could it be that it is all just bullshit?

                •  Ahhh...there you go... (0+ / 0-)

                  You don't like my argument and now demand facts (which are surprisingly in the diary and links I posted).

                  How about this, you write a fact supported diary about how good these fine upstanding citizens are for the economy and especially how the poor benefit from their services - then I we can talk. (My guess is though you can't do it and won't do it because the facts will not support your case).

                  "Republicans only care about the rich" - My late Father (-8.25, -7.85)

                  by Mark E Andersen on Sat May 18, 2013 at 04:25:02 PM PDT

                  [ Parent ]

                •  Also... (1+ / 0-)
                  Recommended by:
                  Sand Hill Crane

                  ...fine upstanding citizens charge interest rates of 400% and don't disclose it, or write up a contract for a title loan that actually states that you are selling your car to them for $5000 and will buy it back at a later date for $10,000...yep, fine upstanding citizens those folks are.

                  Take your libertarian, Mad Max, everyone for himself worldview somewhere else. I don't want to live in your petty self-centered world where the answer to poor people not being able to get small loans is to charge unjustifiable interest rates (You can say cost of business all you want, doesn't make it true). They prey on the poor...period.

                  You want facts here you go:
                  http://www.predatorylendingassociation.com/ (Satire but you should get the point)

                  http://finance.yahoo.com/...

                  http://portal.hud.gov/...

                  http://www.fdicoig.gov/...

                   

                  "Republicans only care about the rich" - My late Father (-8.25, -7.85)

                  by Mark E Andersen on Sat May 18, 2013 at 04:39:39 PM PDT

                  [ Parent ]

    •  I am not sure you understand the problem... (2+ / 0-)
      Recommended by:
      lyvwyr101, The Marti

      ...these companies prey on those who are already in financial straights and in many cases are not financially literate. They are barely one step of being loan sharks.

      "Republicans only care about the rich" - My late Father (-8.25, -7.85)

      by Mark E Andersen on Fri May 17, 2013 at 03:49:49 PM PDT

      [ Parent ]

    •  These companies prey upon young soldiers (1+ / 0-)
      Recommended by:
      Mark E Andersen

      who have never had a loan before and who are often living far away from their families. The slick sales rep makes it sound so easy and isn’t required to explain the real terms of the loan. The loan becomes a fishhook that can’t be easily removed or repaid.

      Until these companies are making a full and complete disclosure of the REAL interest rate and the ever increasing repayment cost, then they are little more than back street usurers and should not be considered legitimate businesses by anyone.

      "We are slow to realize that democracy is a life; and involves continual struggle." ~ "Fighting Bob" - Robert M. LaFollette Sr.

      by Sand Hill Crane on Sat May 18, 2013 at 06:54:25 PM PDT

      [ Parent ]

  •  Didn't we used to have laws against usury?? (4+ / 0-)
    Recommended by:
    burlydee, swampyankee, lyvwyr101, Mortifyd

    As I found at Wikipedia:

    Congress opted to put a federal criminal limit on interest rates by the Racketeer Influenced and Corrupt Organizations Act (RICO) definitions of "unlawful debt", which make it a federal felony to lend money at an interest rate more than twice the local state usury rate and then try to collect that "unlawful debt".[40]

    It is a federal offense to use violence or threats to collect usurious interest (or any other sort). Such activity is referred to as loan sharking, but that term is also applied to non-coercive usurious lending or even to the practice of making consumer loans without a license in jurisdictions that require licenses.

    Emphasis, mine.

    400% interest cannot be anything but usury, by definition.  

    Our younger servicemembers, many of whom are away from home for the first time, often have no point of reference for predatory lenders.  For many of them "predatory lender" means a friend or sibling who wants the five bucks borrowed last payday plus a date for their friend!
    (sarcasm)

    While I don't want the government's nose in all of my business, I would appreciate it if they would keep some businesses from taking an arm and a leg as part of their profits.

    We cannot call ourselves a civilised society if we refuse to protect the weakest among us.

    by The Marti on Fri May 17, 2013 at 02:34:24 PM PDT

  •  Not enough money is entirely Congress' (2+ / 0-)
    Recommended by:
    lyvwyr101, Odysseus

    fault. Congress is tasked with managing the currency, similar to managing weights and measures.
    A hundred years ago, Congress passed off direct responsibility to the Federal Reserve, a private bank, which distributes dollars to other banks, which then lend it back to the Treasury, creating our national debt. To pay off that debt, Congress levies taxes and claims it can only spend what it collects. This is a scam hitch lets Congress pretend the currency is in short supply and needs to be rationed to populations that deserve support. Military personnel are not a favored group. After all, until the end of the draft in 1973, American males were obligated to serve (a remnant of involuntary servitude) and be grateful for any pay they were able to collect. Now we've got an all-volunteer military and because they volunteered and knew what they were getting into, they should be content with their pay. If they're willing to die, why bitch about not getting paid? That's the attitude of many of the people who get themselves elected to Congress by reciting the lines prepared and tested by political consultants to deceive the electorate.
    The approval rating for Congress is at an all time low, but sending in 212 freshmen in the last three elections has not been enough to change the attitudes of the old guard of petty potentates, who get their kicks depriving people of their rights and threatening their ability to sustain themselves. They're predators and they're in cahoots with the middlemen who populate the chambers of commerce whence most political candidates are recruited.
    We need better representatives and law makers who aren't crooks.

    We organize governments to deliver services and prevent abuse.

    by hannah on Fri May 17, 2013 at 02:48:32 PM PDT

  •  Tipped, recced and republished to (2+ / 0-)
    Recommended by:
    Mark E Andersen, Sand Hill Crane

    I started with nothing and still have most of it left. - Seasick Steve

    by ruleoflaw on Sat May 18, 2013 at 05:37:02 PM PDT

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