Payday loans

His pay isn't enough

Guard soldiers from deadly fiscal warfare

Soldiers defending our nation are fighting a two-front war. There's the well-known battle against foreign enemies like Al Qaeda. And now there's a domestic fight against companies that have targeted military personnel for payday loans at interest rates that typically exceed 400% and can run as high as 2,000%. A mounting body of evidence, including a report released by the Pentagon this month, shows that these legalized loansharks are damaging America's armed forces by driving thousands of soldiers, sailors and airmen - as well as their families - into acute, crushing debt and even bankruptcy.

It's long past time for Congress to pass a strong law prohibiting the financial exploitation of America's defenders.

An estimated 22,000 companies nationwide offer payday loans or other short-term credit, typically a short-term advance on a borrower's paycheck. Many of the companies are based in states like South Dakota and Delaware that have no usury cap and can charge whatever interest rate they like, typically $15 per $100 borrowed.

That's more than 400% a year, according to the Center for Responsible Lending, a consumer rights organization.

More than 90% of the time, those who take out payday loans roll the debt over into at least five loans, typically paying $834 for a $339 loan, according to the Pentagon study.

As the war in Iraq swelled the ranks of the military in recent years, payday lenders have flocked like vultures to stateside bases, advertising wonderful-sounding "patriot" or "stars and stripes" loans to military personnel, who by definition tend to be solid citizens who can't skip town but are strapped for cash. A typical Army private first class makes only $17,000 a year, and statistics show soldiers are three times more likely to take payday loans than civilians
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That's a good start, but Congress and the Pentagon also need to raise military wages. Trying to live on near-poverty wages is how between 7% and 20% of all soldiers - an estimated 100,000 at a minimum - fall into the debt trap. And all this high-cost borrowing takes a heavy toll on the nation's strength: Under military rules, soldiers in deep debt lose their security clearance and can't be deployed overseas. That happened to 5,400 sailors and Marines in a single fiscal year, according to Sen. Jim Talent of Missouri.

"If a sailor has lost control of his financial health, he has lost the ability to deploy. If he cannot deploy, military readiness is impacted," says Rear Adm. Len Hering, who commands all Navy bases in California. The Pentagon study similarly concluded that "predatory lending undermines military readiness, harms the morale of troops and their families and adds to the cost of fielding an all-volunteer fighting force."

Our nation would surely go to war with an external foe brazen enough to target and weaken 100,000 active-duty soldiers. Our nation's leaders should be no less merciless at naming, and publicly condemning, the companies victimizing American troops and their families.

Considering half of all soldiers have dependents this is no small issue.