Still More Support for the Troops

Many years ago, when I was in the Navy, I recall being told that there were certain places that we shouldn’t go to shop for clothes, and other things because they ripped sailors off with high interest rates. Nothing was put in writing, but our Chief named several local business establishments.

I guess today it would be politically incorrect to be warning people about such things. So, according to this published article:

“Service members and their dependents could pay no more than 36 percent annual interest on payday loans, vehicle title loans and refund anticipation loans under a preliminary draft of a law intended to stop high-interest loans to the military.

Most payday lenders charge around $15 per $100 borrowed, pushing annual interest rates on two-week loans close to 400 percent.

A 36 percent cap would limit fees to $1.38 for each $100 borrowed.”

And the reaction of the “Support the Troops” business folks?

“We’re not going to make loans at $1.38, so on the effective date there won’t be payday loans available to military people,” said Steven Schlein, a spokesman for the Community Financial Services Association, an industry trade group.”

36% return on their money isn’t enough for these people?

More here.

Loans

One Response to “Still More Support for the Troops”

  1. joe sica Says:

    More irresponsible reporting on this subject. You have to know that banks aren’t making “36%” return as profit on short term loans. If not, you should seek all the facts before leading people down an uninformed path. The cost of borrowing funds for this program alone eat most of your assumption up, let alone operating the business. However, my objection to DOD’s proposal is simply lumping certain loans together as predatory. In doing so they are about the remove “choice” for the soldiers they feel they are protecting. First, RALs aren’t usurious or predatory. The Office of the Comptroller of the Currency (OCC) oversees the national banks in this business, and unlike national banks in the payday loan business who they have put out of business, they make no comment on the RAL programs. It is the “so called” consumer advocates who make that charge. Second, RALs are not high priced compared to many other credit options available to lower income people, if at all. The average RAL this year is $3200. The “one time” fee for that is $121…or 3.78%. That’s it! No further monthly fees or interest no matter how long it takes to repay the loan. Can you lend for that amount? Even the IRS program allowing you to pay taxes due over time charges more than that. Yes, to post this example as an “annual percentage rate” is high (124%) but that is not how people shop for RALs. They don’t have to figure out how much this credit cost them “monthly” or “weekly” – because it doesn’t cost them. It’s a “one time” fee. The recent DOD regs now cap RALs and Payday Loans at 36%. Payday loans cost approximately $15 per $100. In our example of the average RAL they cost $3.78 per $100…four times less expensive. Are RALs for everyone? No. Do they appeal to lower income cash constrained taxpayers with immediate needs? Yes. Is that profiling? Maybe – but not in the predatory sense. You don’t open a lawn mower store in the desert. If there are tax preparers abusing the law, they should be dealt with harshly under the law. But do not continue to demonize a program that helps service men and woman. RAL customers do have unique issues. I would suggest you walk a mile in their shoes and then think about what you would do if these credit options weren’t available to you. Then call up the “so called” advocates to see if they will lend you the money you need. DOD believes they’ve just saved their personnel when all they’ve done is to propose service people get needed money from “unregulated” places. That is what will happen. The “need” doesn’t go away.

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