A Perspective on a Ban on Payday Loans to Military Personnel

Since the payday loan industry was legalized quite a few years ago, it seems as if it has come under fire on multiple occasions. Time and again, such organizations have been lambasted by the media, select elected officials, lawmakers, lobbyists and general public at large. However, even more than the "exorbitant fees," and accusations of predatory lending a plenty, there is one controversy that has burned the highest, with flames fanned in light of the passing of a new regulation.

In 2007, a new law dubbed the FY (Fiscal Year) 2007 Military Authorization Act went into effect, which completely prohibits payday and title lenders from administering loans to military personnel and their families. According to About.com, the law is in light of a report the Department of Defense made to congress last August. In my professional opinion, such a measure was passed with haste and no forethought or consideration of compromise; just two parties on either side of the fence throwing weight around.

It is a well-known fact that while they enjoy signing bonuses and GI Bills for their service and in many cases are provided little to no cost reservation housing, a member of active military personnel earns barely enough income to make ends meet. Then, just like in the case of working class civilians, if an unexpected and/or emergency expense arises, such a bad hand will definitely spell disaster, as the bills will pile up, collections agents will be hounding good people, credit ratings will be obliterated and things might go as far as belongings being repossessed, wages being garnished and legal action being taken. While it might be extreme to think in these terms for most, things like these have and are happening to an increasing number of Americans.

The new law is extreme on several fronts. However, there are some new provisions that I agree with, especially in our industry working to build a better relationship and image with the public. First of all, the specific aspect that prohibits lenders from stopping military personnel from paying off their loans early; after all, we are in the business of helping people in their time of need, not getting rich off of their vulnerability. Not to mention, another provision prohibiting stalls to a member of the military from taking the lender to court. We believe in doing business in an ethical manner. And if a lender does not live up to that standard, not only should they be taken to court, but should not even be in business to begin with!

The problem is, however, is that while expenses don't spare anyone, regardless of civilian or military status and money is needed to get the monkeys off their backs, such folks have extremely limited credit or loan options. In several cases such as these, personnel are unable to obtain credit cards, personal loans from friends or family or small loans from their bank. The complex arises most commonly due to either lack of funds or lengthy credit checks. Therefore, the purpose of getting money for an unanticipated loan are defeated, as when the credit decision is finally made, the deadlines for payment are past due, late charges are inflicted and credit scores are damaged. In order to not compromise the credit ratings, or security clearances of our armed forces, we need payday loans, which provide fast cash to anyone with an ability to pay and who meet a few other simple requirements, available to our men and women in the armed forces.

Two points of contention have and still are always raised in this heated debate over allowing military personnel to take out payday loans. The first of these is the accusation that owners of such companies map out where such places as military bases and other areas with high concentrations of our troops live, open up shop and aggressively push for what they name to be "vulnerable" targets. There is much fallacy in such widely held logic. First of all, our marketing is out to appeal to all people, regardless of their walk of life. The only criteria such establishments utilize in deciding where to set up shop is where high concentrations of people live, work, shop and overall do their business.

Of course, when people enlist in the armed forces, they are, often times, stationed in a place far away from home. Military bases, much like college towns, feature virtually any variety of restaurants, department store, grocery store, big name chain franchise offering various goods, big box store and various other places of business as to offer up comforts that homesick soldiers have grown accustomed to. When you have a concentration of such establishments, the once undeveloped properties become high traffic areas. After all, we represent just another place of business, offering up goods or services just like anyone else and, accordingly, look to be in places where large portions of the population come to do business.

Furthermore, the notion that we aggressively push our services on members of the military on the count of knowing they're between a rock and a hard place, financially, is quite troublesome as well. Where to do business, when to do business and especially whom to conduct business with being left exclusively up to the consumer and without government regulation, is a very effective principle that our economy has been founded on for a very long time. To deny certain customers' rights to purchase goods or services, even if we feel it is not in their best interest, is blatantly unconstitutional and therefore, against the collective industry's ways of doing business.

For example, if you were a cashier clerk working the front counter at a fast food restaurant and a morbidly obese person walked in looking to purchase a large-sized value meal with extra burger on the side...for the fourth time that week, would you deny them service? Of course not! Even if eating such food is not in the best interest of the customer's health, we have no right to deny them on the count of discrimination or a strain on the nation's economy. Same thing with if you're a convenience store clerk being asked for a pack of cigarettes. While it is a well-established fact that prolonged smoking can lead to lung cancer and other serious side effects, one would not deny them on the count of jeopardizing the economy and because it promotes the idea that our citizens are not mentally competent enough to make their own decisions about their own lives; a key principle of the democracy this country was founded on.

Just as in these two examples, denying payday loans to certain populations is a dehumanizing insult to the members of our armed forces. By taking away this right, it assumes that certain folks are not capable of knowing when they're living beyond their means or whether or not they are able to comprehend how the loans work and the penalties of if they don't abide by the repayment agreement. Having such loans available promotes personal responsibility by way of emphasizing the fact that if one abuses the service, it will be much more of a crutch than a help. Therefore, in an effort to quit alienating the men and women that fight for our freedom, we recommend repealing the ban on payday loans to military personnel.

The other bone of contention which was mentioned by the Department of Defense in their campaign against the payday loan industry was when wives or families of military personnel patronize the industry without the soldier's consent, only to let the loan go to default, obliterate their credit and compromise the once good security clearance. There is a simple fix to this issue, which could serve as a compromise to the rash decision to ban payday loans to military folks all together; communication and authorization. In an even more effective measure, I suggest mandating notification of the soldier and their written consent and signature, before their husband, wife or child is authorized to take out a payday loan while the soldier serves their tour of duty. Then, if the person turns out to be delinquent and let their loan go into default status, they would be slapped with a fine or jail time, without any damage to the absent soldier's credit rating or security clearance.

Bottom line, I staunchly oppose the Department of Defense's irrational decision to ban payday loans to members of the military. However, members of the payday loan industry do support the law and are committed to abiding by all such rules.