The Checkout

Saving Private Ryan from Bankruptcy

A couple of weeks ago, I wrote a story about the Pentagon and Congress going after payday lenders that target military personnel.

A payday loan, in case you're wondering, is typically a two-week loan of $500 or less that doesn't require a credit check. To get one, all you need is a checking account and a pay stub. Fees can be high, adding up to an annual percentage rate of 390 percent or more.

Department of Defense brass and consumer groups are convinced such high fees help trap service members in debt. Payday lenders say they're just helping people who otherwise could not get credit.

A brief update on that story: The Pentagon, which has been trying to do more to protect service members from financial scams, has been pushing Congress to cap the fees that lenders can charge military personnel to an APR of 36 percent. That means it would no longer be cost effective for payday lenders to serve military members.

Congress, however, is headed out of town Oct. 6., and the interest rate cap appears to be in limbo.

It's not the politics of the issue. After all, who says they support taking money from service members? In fact, last Friday, House members overwhelmingly approved a separate measure designed to protect military personnel from insurance and mutual fund scams by giving states greater power to police the sale of insurance on military bases and prohibiting certain types of outdated funds. The Senate already signed off.

At a hearing a couple of weeks ago on payday lenders and the military, not too many Senators seemed sympathetic to arguments by the payday lending industry that the Pentagon has exaggerated the extent of any problems. Sen. Mel Martinez (R-Fla.) came down on an industry rep, asking rhetorically if he thought it was "unconscionable" to charge a member of the military 390 percent interest. (The answer, delivered somewhat meekly was, "I respectfully disagree.")

Of course, the fight is about more than what payday lenders charge those in the military and everyone on both sides knows that. Consumer groups don't see much merit in payday lenders. To them, it's an industry dominated by a few big, publicly traded companies that make millions by charging the heck out of people who don't have a whole lot. On the industry's end, the feeling is mutual. Back in August, a trade association for payday lenders blasted the Pentagon study on payday lending as "nothing but a rehash of flawed data, biased analyses and anti-business philosophy pushed by fringe activists."

When I was down in Norfolk a few weeks ago, trying to catch a word with service members as they visited sundry payday lenders near the naval base, one ex-Marine called payday lenders "a necessary evil." He hated the fees, which had him paying back thousands of dollars more than he owed, but he didn't think his bank would've helped him because he already owed them so much money.

Who makes the most sense here? The ex-Marine? The advocates? The lenders? All or none of the above?

By Annys Shin |  September 28, 2006; 7:00 AM ET Credit Issues
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Comments

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Why is so much energy being spent to protect a particular group of people?? If payday lenders are bad, then regulate and/or stop them ... across the board. If military personnel need more resources to get them from payday to payday, then the Pentagon should bone up and provide the resources. But there's something very wrong with protection by category or class. It's - quite frankly - unAmerican.

Posted by: Anonymous | September 28, 2006 7:12 AM

First of all, Chapter 11 is corporate, not personal, bankruptcy. Don't you people have editors?

I agree with the previous comment--why protect just service folks from usorious interest rates? Should we infer from this that if poor folks want better "pay day" loans they should join the armed forces?

In 2005 Congress gave the okay to all sorts of consumer abuse on behalf of lenders, and made it harder than ever for people to declare Chapter 7 (that's what you meant, BTW), wiping out all debt.

It's called The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. (Great name, ha ha.) Why don't you write about what that act is going to do to all of us, instead of wasting precious space and energy on this fake-o-patriotic non-starter.

Posted by: jane | September 28, 2006 7:55 AM

"If military personnel need more resources to get them from payday to payday, then the Pentagon should bone up and provide the resources."

Agreed. I don't see how this going to help military personnel at all. I know that most are paid very little (and the benefits seem to decrease). Shooing people away isn't going to help them out of debt.

Posted by: Financially Fit | September 28, 2006 8:01 AM

Georgia outlawed payday loans in 2004. The cumulative amount of interest and fees cannot exceed 8% on loans of $3000 or less made by unlicensed lenders.

Posted by: Tim | September 28, 2006 8:19 AM

Nobody is forcing them (or anybody) to get a payday loan. They are adults. They are doing this willingly. They know the fees when they go in and before they sign.

Adults need to take responsbility for their own actions and not whine about it. What, we should give low-income, high-risk people low-interest loans????? Give me a break.

Posted by: Non-debtor | September 28, 2006 8:21 AM

Maybe if the Pentagon would pay the miltiary members a living wage, they wouldn't need payday loans.

Posted by: Sue | September 28, 2006 8:52 AM

Jane: Dial it back, this is a blog, not a newspaper article, its probably not seen by an editor before being posted--hence a blog.

Your tone is out of line.

Posted by: Ralph Wiggum | September 28, 2006 9:21 AM

We treat our military like crap (pay them a pittance, give them substandard housing when it's available at all, make it hard for some of them -- especially those overseas -- to vote, etc.) and it's only getting worse, I agree that what we need to do is improve their quality of life and then the problem would mostly resolve itself.

Posted by: R | September 28, 2006 9:21 AM

Military personnel are compensated adequately, the problem is financial management. As a junior officer I had the occasional enlisted troop who made $30,000/yr and was buying a $20,000 car. The problem is not the payscale, it's how people spend their money. Some people don't want to acknowledge that they cannot live a middle class lifestyle on their salary, so they spend money like they are middle class.

Posted by: ex-military | September 28, 2006 9:23 AM

Soldiers need better protection from credit scams but also need better base pay.
The pay tables for the military can be found here -- http://www.dod.mil/dfas/militarypay/newinformation/WebPayTableVersion2006updated.pdf.

A quick check of the math reveals that a lower enlisted soldier will make between 15,276 and 19,944 per year in base pay. Their housing allowance will vary based on location but by design is only 65 - 75% of what is needed for housing in the area.

Yes they are adults and are often times asked to do work and take on responsibilities that a civilian many years their senior can not handle. They are a special breed of young men and women who choose to do something for our nation that most young people are no longer even qualified to do. We need to expand the benifits they receive and give them extra protections in return for all they give us.

Posted by: TC the Terrible | September 28, 2006 9:37 AM

Ex-military has a good point. Most of my friends wound up in the military. Although I was making more than them, they all had more expensive cars, stereos, etc. than I had. I think there is definitely a culture of high materialism in the military, and pressure to keep up.

However, the military is like other jobs--maybe better than--in that one can take a lot of initiative to advance faster and thereby make more money. There are also many opportinities to get bonuses.

The poster Jane is perfectly justified in her complaints. The Washington Post's credibility has decreased dramatically by a recent influx of journalists who don't know what they are talking about. It shows everywhere: Print version, online articles, blogs.

Posted by: bkp | September 28, 2006 9:45 AM

Jane: Thanks for pointing out the error. The headline's been corrected.

Posted by: washingtonpost.com | September 28, 2006 9:54 AM

Why the fuss now that members of the military are involved. For example, why are insurers regulated differently while selling on military bases versus out in the general public.

All of this seems like more of the military/industrial machine supporting its own. The payday loan sharks (and that's what they are) operate in inner cities too, but no one is proposing to limit the interest in those neighborhoods.

I agree with Jane...we're all in a world of hurt because the bankers control everything and our federal lawmakers are clearly on their side.

Posted by: Protect Everyone! | September 28, 2006 9:56 AM

Editor- you still need to change the link from the front page. It still says Chapter 11

Posted by: Anonymous | September 28, 2006 10:03 AM

The problem, for the most part, is housing. As a prior enlisted soldier, I can attest that the housing allowance never offset the cost of housing for my family, yet senior enlisted and *ALL* officers (who made much more money than I did) were able to live on-base because housing had been set aside for them. I can recall senior enlisted housing at two assignments that had a number of vacancies, yet lower enlisteds had to pay rent.

Lower enlisted are actually in a position that they make the least, but the military does not assist them enough to house, feed and care for their families. Yes, the argument will come forward that only the servicemember joined the military, but can you actually say this given the fact that some of these lower enlisted families have the sole breadwinner in a combat zone today? They deserve better.

Posted by: prior_military | September 28, 2006 10:22 AM

Financial Education - for everyone, so that choices made, including bad ones, are at least informed decisions by the borrowers.

Alternative Lenders - Beside the banks and the pay-day lenders, there are Credit Unions.
They are non-profit, generally offering lower loan rates (including risk based lending, or interest rates based on one's credit worthiness), higher dividend rates (because "profits" go to the members, not to shareholders), and finacial education from both in house sources and via third party vendors. Resources include debt reduction services, credit counseling, budgeting, investments, and wealth management. Plus fees are lower, there are things like accumulator CDs, where you can put in a minimal amount each paycheck and still get higher rates without having to have $1,000 or more upfront. Provides a cushion for those who want to break the payday loan cycle.

And yes, while the payday lenders may post their rates, how on earth can anyone justify rates of over 100% to any population or group??

Posted by: Credit Union Booster | September 28, 2006 10:30 AM

God Bless the men and women in the military for enlisting and serving us and our country. Congress needs to wake up and smell the coffee -> PAY THESE POOR PEOPLE A LIVING WAGE and give them enough of a housing allowance to survive in the real world.

Solve the problem at its core. Don't protect the military as a separate class. I agree with a previous poster who says it is un-American to do so.

The whole financial "machine" preys upon those who need it the most. Credit card interest rates at nearly 30%; legalized 'loan sharks' (payday loan people), ridiculous bounced check fees, $4 to withdraw cash at an ATM that doesn't belong to my bank, etc.

Posted by: mazman | September 28, 2006 10:40 AM

I agree that the payday loan problem is more than a military issue.

Payday loan company owners make a handsome living on the ever-present portion of the population who fail to live within their means. Some people are better at managing their money than others, and there will always be the customers who would borrow money at an interest rate of 1,000 percent if the law allowed it.

That is why we have usury laws. We as a society place limits on what lenders can charge borrowers who lack judgment or financial expertise in order to prevent such borrowers from enslaving themselves to their moneylenders.

And make no mistake - a 390% interest rate results in enslavement of the borrower to the lender. And it shouldn't be allowed in our country.

Posted by: Bill | September 28, 2006 11:04 AM

(1) Link on Washington Post front page still refers to Chptr 11 (11 AM 9/28/06). "The Checkout: Bankruptcy for Chapter 11"

(2) "Former Marine" and "ex-Marine" are very different. I give the writer great kudos in knowingly differentiating and it would thus be no surprise that the "ex-Marine" was still visiting this institution.

(3) The Marine Corps has a hymn. Most of us who join are "believers" who are in some way "called" to the "brotherhood." Financial poverty is usually a temporary a side effect that is best remedied by getting out. Pitty those who are spiritually more poor for never having the honor of serving.

Posted by: Kerst ter Weele | September 28, 2006 11:10 AM

The problem is that lenders will lend service members anything because they know that they will be repaid as long as that person is in the service. What they will do if you do not pay is call your command and your commander will give you an order to pay that bill. The businesses around the bases know this and take full advantage. Could a lender call your boss as a civilian and would your boss make you pay?

Then there is a high amount of competition and materialism amongst the service members. I did 4 years Active in the Marines and 2 years a spouse of Active Marine. Anytime one Marine gets something it's a competition for others to get it or something better, cars, tvs, clothes. This is regardless of if they can really afford it. Then its off to the payday loan.

Posted by: ex-wm | September 28, 2006 11:35 AM

To clueless Jane:
"First of all, Chapter 11 is corporate, not personal, bankruptcy. Don't you people have editors?"

The Blog entry you attach makes *no* reference to Ch. 11 Bankruptcy. It is merely titled: "Saving Private Ryan from Bankruptcy." You are therefore shadow-boxing a non-issue with your reference to Ch. 11.

In any case, you're dead wrong. In 1991, the Supreme Court ruled in Toibb v. Radloff, 501 U.S. 157 (1991)that individual debtors *can* file under Ch. 11 ("The plain language of the Bankruptcy Code permits individual debtors not engaged in business to file for relief under Chapter 11."),
http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=us&vol=501&invol=157 so before you should start attacking people, get your facts straight!

Posted by: Ken | September 28, 2006 11:43 AM

Thank you for writing this column! It is nice to see more public attention being drawn to this issue. Payday loan shops increase exponetially around military bases- it is clear that men and women in the services are being targeted by by this industry.

Of course the issue is much broader than the military- but hearing that service members are targets for predatory lenders gets the attention of the public and the lawmakers. Curbing payday loan practices against the military is a first step towards taking broader action against predatory lenders.

Posted by: Stephanie | September 28, 2006 11:53 AM

Ex-military, you're giving other junior officers a bad name- "Military personnel are compensated adequately" RIIIIIGHT. Sure, junior enlisted often times buy that expensive new car and mismanage their funds... but you can't just say it's all mismanagement. Sure the single jr troop might be able to live it up, but try raising a family on military wages. If it's so adequate why do so many qualify for food stamps (at poverty level income)? Could it be that $30,000 for putting your life on the line isn't adequate? *sigh*

Off my rant of that, free trade is great, however, abusing it by taking advantage of people is not. The goal of loans should be to help both parties, not crush someone because of a lender's greed.

As former military myself I can definitely say the military needs more attention and protection (I hate seeing benifits cut), but not sole attention in cases where the overall industry needs regulated to protect everyone from abuse.

Posted by: Chris | September 28, 2006 12:07 PM

Military pay is low, military is voluntary, families are voluntary. Except in few cases the root of the problem is poor schools and parenting.
A person can obtain a career path at the age of 17 and plan on retiring at 37. During that time they can get frequent promotions, as much education as they can handle, and lots of travel. The risks can be high depending on your field, but so are firefighters and police occupations.
What may be needed is more financial counseling and family planning.
As far as the loan companies go they probably have more success in getting their money back from military members so they should be required to charge less interest than to the illegal immigrant working a day job.

Posted by: viet vet | September 28, 2006 12:42 PM

Having read the comments to this point, I would like to compliment Bill for his insight into human nature and the role society should take, and would like to add one other point.

Almost all of the major religions contain prohibitions against usury. Among some of the many passages against usury in the Bible:
"If you lend money to any of My people who are poor among you, you shall not be like a moneylender to him; you shall not charge him interest" (New King James, 25)
"You shall not lend him your money for usury, nor lend him your food at a profit" (New King James, 37; Leviticus 25:35-37)

The Koran states: "Those who charge usury are in the same position as those controlled by the devil's influence. This is because they claim that usury is the same as commerce. However, God permits commerce, and prohibits usury" (2:275). It should be noted that the Quran forbids only usury, not the charging of interest.

Which brings us to a more worldly source; Webster's Dictionary, which defines usury as "an unconscionable or exorbitant rate or amount of interest; specif: interest in excess of a legal rate charged to a borrower for the use of money". And therein lies the key, namely that it is up to our elected legislators to define what is acceptable and legal.

I would suggest that even an APR of 36 percent mentioned in Annys Shin's article is exorbitant and uncalled for, let alone 390 percent! The excuse of payday lenders and organized crime loan sharks that they provide money to those folks with such bad credit they are justified in charging those rates because of the risk they take, otherwise that no one else would, in my opinion simply exceeds the boundaries of morality and is unconscionable. This is a problem that affects not just our military, but one that has been around since the dawn of mankind. It is up to people of good faith and their elected representatives to set the rules of what is morally and legally acceptable, and should they fail to do so then they should be held accountable this election year.

Posted by: Enis | September 28, 2006 12:58 PM

Ken, earlier, before you came along, the headline referred to Chapter 11.

I think ex-military's point is that raising enlisted salaries (while it may otherwise be a great thing to do) is not going to solve the problem of payday loans, because many young enlisted personnel who are untrained in managing their finances will still just go out and spend beyond the limits of their (higher) salary.

Slightly unrelated question: Are the tax refund loans offered by H&R Block and others as bad, in terms of the effective interest rate, as payday loans?

Posted by: Tom T. | September 28, 2006 1:38 PM

As an outsider (Canuck) am I the only one that realiazes that many of the people using these so-called loan companies are in fact not regular military but Reserves & National Guard who have been called-up for extended duty with very different financial pressures??

Payday lenders are evil. No exceptions!

So let's not beat up the troops. Iraq is mostly the cause.

Posted by: DougW | September 28, 2006 1:52 PM

Ditto to Credit Union Booster and Enis. I would like to just add that all too often it is the 18 and 19 year-old enlistees who are victimized by loan sharks. Yes they are adults, but they are very young and uneducated. They specifically need to be educated about credit unions and how to develop and live by a budget. But they do deserve legislation to protect them and it's the least our lousy government can do for them; remember that they are willing to die for the rest of us!

Posted by: Monica | September 28, 2006 2:18 PM

Sue: Military folks are paid low wages but they are also able to start collecting retirement right after they retire without having to wait to become a certain age. A 38 year old soldier who entered the service at 18 is able to collect military retirement, even if they take a civilian job after retiring. How many people who ARE paid a living wage able to collect retirement income at 38 yrs old?

Posted by: AH | September 28, 2006 2:18 PM

DougW, thanks for your comments. Some of the people posting here are quite nasty. Young GIs have many challenges and our government should protect them from predatory lenders. These young folks are away from their families so they don't have that support and advice readily available. Deployments, TDYs and Permanent Change of Station (PCS) moves always end up costing the individual money. Do they need to budget better, yes, but that doesn't excuse the lenders who spring up outside the base ready to pounce on some poor kid. And junior officer, give me a break. What do you know about living on an enlisted person's pay. I'm sure you were enjoying your base housing while my family tried to fine a place to rent on my $350 a month in housing allowance.

Posted by: Military Retiree | September 28, 2006 2:21 PM

prior_military: Perhaps lower ranked enlisted personnel should refrain from getting married until they can afford it.

Posted by: AH | September 28, 2006 2:24 PM

You're a sweetie, AH. Let me guess, you don't have a "support the troops" sticker on your car? I'd already been in the military for 7 years before I got married and had my son. I would have been approaching menapause if I'd followed your advice.

Posted by: Military Retiree | September 28, 2006 2:28 PM

Mazman said "Congress needs to wake up and smell the coffee -> PAY THESE POOR PEOPLE A LIVING WAGE and give them enough of a housing allowance to survive in the real world."

I would agree with you but who's going to pay for it? Bushy and his buddies like cutting taxes for the rich.

Hey, this is nice: the lower income and military tend to vote Republican and Republicans - when in power - screw over the lower income and military. Got to love it.

Posted by: Non-debtor | September 28, 2006 2:37 PM

Military Retiree said "I'm sure you were enjoying your base housing while my family tried to fine a place to rent on my $350 a month in housing allowance. "

I'm sorry but you enlisted. I assume you knew what you were going to get paid and get via benefits and you made the choice. You got married and had a family. You made choices. These choices put you in a hard place financially but they were CHOICES.

I give no sympathies for people bemoaning their choices.

Posted by: Non-debtor | September 28, 2006 2:40 PM

All members of the military and their dependents are eligible to join credit unions. Pentagon Federal Credit Union and Navy Federal Credit Union are two of the country's biggest credit unions, and they do amazing work, every day, to serve their members' needs. Perhaps further outreach and education is necessary on post-by-post basis to help people avoid payday lenders.

Posted by: CU | September 28, 2006 2:41 PM

To Non-debtor, you're actually right about that. We got some of the biggest pay raises under Clinton. The republicans pay lip service to supporting the troops, but they're not really willing to put their money where their mouths are. Really supporting the troops would involve that thing they hate so much, paying taxes.

Posted by: Military Retiree | September 28, 2006 2:43 PM

Perhaps, in addition to financial education, there needs to be more family planning education going on in the military! Can anyone tell me if birth control is covered under military health programs? (Tricare, is it?)

Posted by: choices | September 28, 2006 2:48 PM

Wow, you people are something else. Yes, military people get free birth control at the base hospital. And non-debtor, I'm not bemoaning my choices. I have no regrets. I've never gotten a pay day loan, have no debt and one child. And yes, I'm enjoying the retirement check I get each month on top of the pay I get from my civilian job. I earned it.

Posted by: Military Retiree | September 28, 2006 2:56 PM

A person can go to a Payday Loan outlet late in the evening and walk out with cash. This is a service that no credit union is going to provide. Payday portrays their service as being useful in emergencies, but it's equally useful for financing impulse buys.

Higher pay might help, but as was pointed out in Michelle Singletary's blog today, Payday outlets are increasingly opening up in affluent neighborhoods. Having "enough" money is no guarantee that anyone will manager their money well.

Posted by: GJ | September 28, 2006 3:04 PM

Most Credit Unions also have ATM machines for legitimate after hours emergencies and/or impulse buys. At least CU's don't charge an arm and a leg like those Payday joints.

Posted by: Enis | September 28, 2006 3:26 PM

Let me tell you why I think military pay is adequate. After getting out of the service after only 6 years I took a civilian private sector job for $95,000. My private sector job required that I contribute toward my healthcare and my retirement. After subtracting for those and my lost tax benefits, I took home $200/mo less than I did as a captain with 6 years of longevity living in a low COL area. This was on the officer pay scale.

The enlisted pay scale is low for people with college degrees and a spouse, no doubt. But, the majority of enlisted are in the 18-20 age range and single. Moreover, the majority of compensation is delivered in the form of benefits, not wages. They get base pay of $1100/mo, food allowance of $385 (tax free), housing with all utilities paid, free health care, and a pension program that requires no contribution. They may have also gotten an enlistment bonus (up to $40K), and the GI Bill to pay for college (another $40K). The cost of the military providing all these benefits is easily $4,000/mo if not more, and this is for a high school graduate (typically). And after all this, you can leave in 4-6 years and get a higher paying job in the private sector using your skills, training, and education that the military gave you.

I salute those who choose to serve because I know they by and large don't do it for the money.

Posted by: ex-military | September 28, 2006 3:28 PM

Journalists are always getting blamed for dodgy headlines. In fact they rarely write them themselves, it's an editorial job.

Posted by: Hacks Unite | September 28, 2006 3:54 PM

To ex-military, Re: "free housing w/all utilites paid". Not everyone gets base housing. I was only able to get into base housing twice in 22 years of service. Housing allowances are rarely enough to cover rent/or mortage payment and utilites. While I agree with most of what you say regarding benifits, let's keep it acurate. I always thought my pay was adequate and my benifits generous. That doesn't change my mind about payday lenders.

Posted by: Retired Military | September 28, 2006 4:08 PM

To poster Ken:

You wrote to me above: "In any case, you're dead wrong. In 1991, the Supreme Court ruled in Toibb v. Radloff, 501 U.S. 157 (1991)that individual debtors *can* file under Ch. 11 ("The plain language of the Bankruptcy Code permits individual debtors not engaged in business to file for relief under Chapter 11."),
http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=us&vol=501&invol=157 so before you should start attacking people, get your facts straight!"

Chapter 11 is generally and essentially for business bankruptcies. That's an easy one. The editors realized their mistake and fixed it.

To everyone else: I was a bit rough with the "you people" business and I apologize. Perhaps I'm just getting old, but I see so many beginner mistakes and omissions in great papers like the Post, it makes me cranky. And sad.

Non-"star" newspaper writer and editors are run ragged and staff unions are under fire. Plus there's pressure to be clever and "sexy" in order to stay employed/advance through the ranks. Maybe that's the problem--not enough time to be careful, not enough time to teach the kids, understandable reluctance to challenge the corporate masters.

If newspapers weren't free on-line today, I would rarely read them. Lotsa folks like me.

Attention WPO shareholders: Hire more WaPo staff! Stop the cuts and buyouts!

Product is suffering!

Posted by: Jane | September 28, 2006 4:54 PM

Why don't you answer your own question there can be nothing worse than someone posing as a consumer advocate who wants to be neutral. Pay day lenders are bad for everyone lets not glorify them and the fact that they are owned or affiliated with national banks compounds the hypocracy of them providing "just a needed service".

Posted by: Consumer pro | September 28, 2006 4:55 PM

Why should only the military get special protection from these predators? Everyone deserves protection, not one particular class of citizens. The Congress are for ALL people and should protect ALL people. Change the bill or don't pass it!!!

Posted by: Dave | September 28, 2006 5:13 PM

Dave, I agree. I think our country is being held hostage by rampant materalism, credit debt, and high interest rates.

If we had a high inflation rate, charging high interest (inflation + 2%) makes sense, but we are NOWHERE near the hyperinflation rate that would justify even 8% APR.

Posted by: Wilbrod | September 28, 2006 6:56 PM

I would like to preface this post with the statement that I'm just the girlfriend of service member currently serving abroad. I attended college at a school with a large ROTC program and know many people who have joined the military. While my comments are not from direct personal experience, they are the result of observations I have made over the years.

I agree with the comments that members of our armed services need to be payed more. However, this is not going to solve the problem. The problem is with the rampent materialism in our society and a lack of education. Anyone who recieves more money will usually start spending it on luxury items and still be cash poor at the end of the day. What do you think the majority of military personnel do with their signing bonuses? Instead of saving they go out and by a flashy new car (hence the term ensign mobile). The problem of military personnel living beyond their means will not stop unless they are properly educated on how to properly budget and learn the difference between wants and needs. The military should provide a basic financial course with every new recruit in basic training.

The proposed bill should not be limited to military personnel and should be aimed at the entire pay day loan industry. However, Congress has never been sympathetic to trials and tribulations of the little guy trying to make it in this world, hence The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

Posted by: BiochemGirl | September 28, 2006 7:34 PM

To non debtor - glad someone else sees the irony in the military voting Republican.

Posted by: BiochemGirl | September 28, 2006 7:42 PM

In my experience, four years active duty and three more in the reserves, many military spend far more than they earn. I think the problem is fundamentally two-fold. The first aspect of the problem is that as a military member, your income is guaranteed for some period of time. As such, many junior personnel buy more than they can afford, because they know that they will be able to make payments for an extended period of time. This same issue makes lenders very willing to go after military members, as do favorable (for the lenders) garnishment rules.

Secondly, for many people, the military is the first full-time job they've had. They have not been taught to budget or to live within their means. I work on a base with a high percentage of brand new second lieutenants and I am constantly amazed by the number of 2Lts driving late-model BMWs and Audis. The same, to a somewhat lesser extent, applies to junior enlisted. A brand new airman does not need to be driving a new Mustang GT or Ford F-250. However, those are the choices people make, and if they are willing to spend money, there will always be someone willing to take it from them.

Posted by: DT | September 28, 2006 9:29 PM

Military Retiree: I've been working in the DoD world for nearly 30 years and one thing that I can say is that entitlements are becoming a larger portion of the defense budget each year. From
http://www.worldpolicy.org/projects/arms/updates/011105.html

"One reason is that much of the recent rise in spending has been fueled not by new tanks or missiles, but by new costs associated with military personnel - especially retirees. These costs amount to a permanent increase in the military budget. Unlike spending on equipment, they cannot be canceled or deferred.

Since the start of the buildup, the rising costs of military pay, retiree benefits, health care and family housing have greatly outstripped inflation and added more than $40 billion to annual Pentagon budgets, even though the number of active-duty troops has essentially stayed the same. Moreover, the annual costs continue to grow rapidly."

Posted by: AH | September 29, 2006 1:05 PM

Not all enlisted personnel live above their means. I remember being on the housing list at Ft. Campbell for 2 and a half yrs and having to live off post. My husband was an E4 at the time and after all rent and bills paid we had $40 til next payday. We used to windowshop at super Walmart!! (we were 20 at the time) Who does that? We couldn't even afford to splurge there. Fast forward some 12 yrs and my husband is a recruiter in Tucson and we are forced to live off the economy. We could not find housing within our BAH and have to rent around $200 over just to be near his station. (recruiter incentive pay is $450 extra per mo., but they don't tell you all the nonsense out of pocket expenses you pay) That doesn't include utilities or car insurance and etc. We have no credit cards and struggle to try and save money.

Posted by: militarywife | September 29, 2006 10:13 PM

I just read through all the comments here and am saddened (and appalled) by how many are so quick to talk about military members making "individual choices" to use payday lenders. In our very individualistically-oriented U.S., this kind of rhetoric makes sense, but it still misses the larger picture, I think. "Individual choices" are made in a SOCIAL CONTEXT -- and when you see a lot of people making the same poor decisions, clearly something larger than just individuals each making his/her own individual bad decision is going on. It's a SOCIAL pattern, not just random individuals, and I think it calls for a social response -- like limits on payday lenders.

The rhetoric of "individual responsibility" (or its twin, "personal responsibility") has the assumption that people are perfect (or should be). And this is especially true of those who have the least, e.g. the working-class or poor people who are being victimized, yes victimized, by payday lenders.

The payday lender who said there was nothing wrong with charging 390% interest reminds me of all those tobacco executives who said "I do not think smoking is addictive." Um, yeah, right.

Posted by: Karen | September 29, 2006 10:35 PM

We really need financial education, as ex-military pointed out. When I was younger, i lived month to month on credit cards, giving them at least a thousand bucks in interest every year; and i was not alone. Now I'm older and smarter, and know to always pay off credit cards every month, have a small stash of cash in a saving account, and contribute the yearly max to my Roth IRA. That's all you need to do to stay out of debt. Actually, its even simpler, spend less than what you make.

Posted by: Rob | October 3, 2006 1:41 PM

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Posted by: algogocom | October 5, 2006 4:04 AM

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