Newspaper Editorial Mostly Supports Military Payday Loan Amendment
By J.J. CameronPayday Loan Writer
In his fight against military payday loans, Senator Jim Talent has the support of The St. Louis Dispatch.
A recent editorial in that newspaper discusses Talent's proposed addition tacked on to defense bill SB 2766. This proposal would limit the annual percentage rate to 36 percent for military members and dependents. It's a figure no fax payday loan lenders argue is less than it costs to service such loans, and that the industry couldn't stay in business at rates that low.
There's truth to that argument, and payday loans - if they're NOT allowed to snowball out of control - do serve a legitimate purpose. All kinds of bad credit payday loans can be a handy short-term stopgap … or the gateway to ruin. Unless they are paid off immediately (the loans can be rolled over again and again), clients will be racking up debts many times the amount of the original cash loan.
"There's a tremendous abuse of servicemen and women going on," Talent said, and it's creating "a huge military readiness problem," he said.
Talent's Democratic opponent for the Senate race in November, Missouri Auditor Claire McCaskill, says that his proposal would help quash the competition of predatory finance companies, including a Kansas City-based lender, Pioneer Services, that played a role in drafting the language of the amendment.
Such a lack of competition, critics say, could leave military families with fewer options, making them even more susceptible to exploitation by predatory lenders.
While the Talent/Nelson amendment has the support of the Center for Responsible Lending, a nonpartisan research center in Washington, and the Consumer Federation of America, there are other approaches to the national military payday loan problem.
Talent might take a look at the new reforms in Illinois. State law now limits fees on a two-week loan to $15.50 per $100. Borrowers must wait a week before rolling over a payday advance, and lenders must offer interest-free payment plans to borrowers who get in over their heads. Illinois applies those limits to civilians as well as the military, which makes a lot of sense.
Federal legislation limiting fees and rollovers would end payday loan abuses. Then Congress should take on the finance companies - and the issue of lousy military pay.
