Payday Loan Lowdown

The payday loan problem now seems to have reached gargantuan proportions with the Pentagon creating a report stating that these loan centers are preying on members of the armed services. According to the report, nearly one in five members of the armed services have had their finances screwed up by payday loan stores. These stores charge cash-strapped military families interest of 400% or more, the report found.

This problem has become more acute during the Iraq war when the military struggled to fill its ranks. Troops with debt troubles cannot be deployed overseas, so a huge number of soldiers had to perforce stay back. The report says payday loan stores have sprung up by the thousands around military bases and elsewhere in the past decade. The report cites estimates 13% to 19% of service members — at least 175,000 people — took out high-interest, short-term loans last year. USAToday.com reports:

Master Sgt. Leah Caldwell, who manages training and deployment for a squadron of the Missouri Air National Guard, says she has had several airmen get so deep into debt with the loans that they lost their security clearances, jeopardizing their deployment. One airman, she says, took out a $500 loan and after refinancing it several times saw it grow to a $2,600 debt.

Read more: Pentagon sees risk in troops’ loan debt

While the authorities have come out in full force against payday lenders, there is one simple fact that they have overlooked. No payday lender has badgered people to come to them and use their services. Payday lending does not involve shoving money down the pockets of unwilling people.

Only those people who need money urgently and have a regular job, through which they can repay the loan, are eligible for a payday loan. Of course there are people who find it difficult to repay their loans and fall into a debt trap. But that involves a deeper malaise — one of free spending without proper saving education. So when the authorities are trying to oust payday loan centers, they are trying to cure the symptoms of the problem and not its root cause. What is the need of the hour is to educate people on how to spend within their means and save some for a rainy day. Once that is done, payday loans will not seem like a big problem.