By: Gaurav Bhola, MSM, Managing Editor
The U.S. military men and women based in Utah are no longer able to get short-term personal loans in the form of payday loans from payday lenders. The voluntary decision by Utah payday lenders to refuse payday loans to soldiers has left many members of the military upset.
Many of our soldiers turn to these types of personal loans to sustain themselves and their families. Military members at the enlisted soldier level have been a strong customer base for the payday cash advance loan industry for many years. Many soldiers access payday loans through local payday stores, online cash advance, payday loan online, no faxing payday loans, and faxless payday loans.
Payday loans are small, short-term personal loans anticipated to cover a borrower's expenses until his or her next paycheck or payday. At the behest of the Pentagon, the U.S. Congress last year passed legislation that caps interest rates on consumer loans for military men and women at 36 percent. The Pentagon higher-ups wanted to cap triple digit annual interest rates being charged on some payday loans.
Herein, the Utah payday lenders responded to the new cap by disallowing new loans to military personnel. The lenders contend that on short-term personal loans with 36 percent annual interest rates, they can only charge $1.38 for a 14 day, $100 loan, approximately 10 cents per day. According to the payday lenders they can’t turn a profit on a 36 percent annual rate.
Consequently, they stopped offering new payday cash advance loans to military servicemen and servicewomen.
Some military personnel who used payday loan as a stopgap measure may now have to turn to more expensive alternatives, such as bank overdraft protection or playing the check game.
The military brass is in the midst of increasing education to service members regarding financial planning. The military brass would rather have the soldiers going to their credit union or bank for short-term loans, military aid societies, support centers, or their families.
However, when an enlisted E1 (Rank <2) makes a $1273.50 per month, it is not difficult to see why some members of our military turn to payday loans. Sure, some get free housing or off-base housing allowances but it is not enough pay to sustain themselves, let alone any family and children. The real scandal is that our soldiers should be getting more, in terms of salary, financial planning education, and support in all realms.
