Thursday, October 19, 2006

One would think the decision by Advance America to cease military payday loan operations would be lauded.

But one would be mistaken.

A recent opinion piece in The State talked about the problem with such a move. It's paraphrased below …

The sincerity of the gesture rings hollow when you consider the lender will continue making payday loans to military families. Unfortunately, many of these families that fall on hard times get snared by such lenders.

Consumer advocates rightly suggest Spartanburg-based Advance America’s move seems political. Not only that, it leaves itself room to continue offering loans to the military by not ruling out family members.

Susan Lupton, senior policy associate with the Center for Responsible Lending in Durham, said a spouse who isn’t in the military could apply for a personal loan for the family. The policy will only apply if a customer walks into an Advance America location and produces a military pay stub as proof of employment.

Ms. Lupton said the center is skeptical about how long Advance America, the nation’s largest payday lender, will keep the policy in place. If this isn’t a genuine effort to give soldiers and their families relief, what’s really going on?

I viewed Advance America’s gesture as an attempt to grab some good public relations and get ahead of Congress’ decision to cap the annual interest rates for payday cash advances and other small consumer loans that could be charged to military personnel and their families.

Just days after Advance America’s announcement, the U.S. House and Senate agreed to cap the annual interest rate at 36 percent; the provision is part of the defense authorization bill.

The House and Senate approved it at the behest of the Department of Defense, which issued a report in August that pushed for tighter regulations from federal and state lawmakers. The report said that payday and other high-cost short-term lending “undermines military readiness, harms the morale of troops and their families, and adds to the cost of fielding an all-volunteer fighting force.”

Other cash loan lenders say they also might stop lending to active military personnel. They say they can’t make enough money by charging 36 percent annually.

The lenders also say it’s not that big a deal for them to drop loans to the military, because that sector makes up only 1.3 percent of their business.

But make no mistake about it, these folks are running scared because they know people are beginning to see just how harmful quick cash loans can be. Consumer advocates have been trying for years to get governments to tighten restrictions.

But when the Department of Defense joined the fray and detailed how badly the loans hurt the military, it prompted Congress to act.

And this is only the beginning.

Leaders in states where there is a heavy military presence are now considering tighter measures, including capping the interest rate at 36 percent. Some legislators in Virginia and Washington state are particularly eager to push for tighter restrictions on short term payday loans.

And they’re just as worried about civilians being ripped off by payday lenders as they are the military.

South Carolina lawmakers should be, as well. Our neighbors in Georgia and North Carolina already have banned payday lending, prompting many of those lenders to move to South Carolina, where they can still legally charge outrageous rates.

I continue to wonder how our state’s leaders can claim to want to improve the economy, per capita income and competitiveness, yet allow payday lenders to ravage our state’s people.

Our workers here in South Carolina make less than those in other states. If we’re already behind, why allow predators to legally dupe them out of the limited hard-earned cash they have?

A Sunday article by State writer Jim DuPlessis points out that South Carolinians are losing their homes and falling behind on bills at a higher rate than the rest of the nation. Why? Because of high unemployment and a rising number of high-interest loans - including payday advance loans.

We can’t allow that to continue.

When the Legislature reconvenes in January, lawmakers should consider proposals to severely limit, if not ban, payday lending for everyone - civilian and military.

Now that the Department of Defense has helped expose these lenders, we must recognize them as the loan sharks that they are.

This entry was posted on Thursday, October 19th, 2006 at 5:58 am and is filed under South Carolina.