Payday Lending: An Unnecessary Burden on Military Service Members

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In 2024, you would be hard-pressed to drive more than a few blocks outside the gates of any military base in the US without encountering a slew of payday lending establishments. For decades, these entities have locked service members into predatory lending arrangements, wreaking havoc on their credit scores, and personal and professional lives.

I saw the effects of payday lending first hand when I was in the Army from 2006 to 2011. Helping service members get out of predatory lending arrangements is an arduous process. Fortunately, our nation’s military has members who volunteer to provide financial coaching and advice to help their fellow soldiers stay out of the vicious cycle of debt. But it’s tragic that we are at this point. Our military should be able to focus on mission readiness without having to worry about the fine print in payday loan agreements.

Protecting members

The Military Lending Act (MLA), passed in 2006 and expanded in 2015, took some initial steps in protecting service members against predatory lending schemes. However, the MLA does not go far enough. Capping military payday lenders from exceeding a 36 per cent annual percentage rate (APR) is not an adequate safeguard against would-be debt collectors and still allows payday lenders to inflict material and lasting damage on the personal and professional lives of service members.

The most effective way to limit the influence of payday lenders in the military marketplace is to provide service members with a common sense method of accessing their paychecks in real-time without accruing debt, becoming subject to collection agencies, or damaging their credit scores.

New innovations in payment technology are enabling millions of working Americans to have choice and control over their earned income through earned wage access. In fact, America’s leading employers, from Target to Hilton, offer earned wage access as a financial wellness benefit to help their employees pay bills and stay out of debt.

The premise of earned wage access is simple: workers have access to their money as they earn it, without having to wait for biweekly or monthly paychecks and without incurring debt. Whether it is an unexpected broken water heater or a car suddenly in need of repairs, ‘life’ doesn’t happen in biweekly or monthly instalments.

Avoiding unnecessary loans

When unexpected expenses inevitably occur, service members should not have to turn to the unsavoury option of harming their credit with a 20 per cent or higher APR payday loan or credit card. Unlike the high-cost payday loans, most providers of earned wage access either charge a small ATM-like fee for immediate access or no fee at all for next-day access.

In fact, research shows that nearly all of those workers who have the employer-sponsored benefit of earned wage access no longer resort to predatory payday loans or paying costly overdraft fees to make ends meet. They simply utilise the money that they’ve already earned at the press of a button on a smartphone. In many cases, earned wage access platforms feature free financial counselling and automatic saving options.

Our nation’s soldiers, sailors, airmen, and marines volunteer to serve courageously in some of the most dangerous places on the planet and are the foundation of our country. I’ve seen them do incredible things on behalf of our country. As private citizens, we should help our military service members by crossing off predatory payday loans from their ‘worry list’ in 2024.

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