You know, just the other day I was riding around town, luxuriating in the moral superiority conferred by my "Support The Troops" magnetic bumper attachment (a sticker would leave icky residue when I decide to stop supporting the troops) and thinking about how much my decorative encouragement must mean to the men and women of our fighting forces. And yet, somehow, when I read that nearly 20 percent of our soldiers are being preyed on by predatory lending operations set up near bases, I wonder if I might need, I don't know, another bumper magnet.
Predatory lenders are generally a problem in poor urban areas where reputable banks don't see the sort of profit margins that justify a branch. But capitalism abhors a vacuum and folks still need loans, wire services, money orders, and all the rest, so small lenders charging insane rates flow into the gap. That's a large part of what folks like John Edwards mean when they say "it's expensive to be poor," loans and advances that respectable banks and good credit ratings make trivial for the rich become economically dangerous for the working class. A minor advancecoupled with a couple hundred percent interest rate can, under certain circumstances, bankrupt a family and destroy their credit, thus leaving them unable to draw on better lenders, thus perpetuating the cycle. It's unsavory stuff.
These payday loan stores are increasingly becoming a problem near military bases, too, where soldiers seeking an advance on their (paltry) paychecks or a loan to fix their car are being charged exorbitant rates. The issue grew so acute that Congress commissioned a study on the rates. The researchers found that soldiers are being charged $15-$25 for a two week, $100 loan(!), and annual rates of up to -- ready for this? -- 780 percent(!!). The average borrower pays backs a total of $834 (!!!) on a $339 loan, and the debt problems can grow so urgent that they lose their security clearances (assumedly under the rationale that debt renders one susceptible to bribery).
So we have two forces at play here: The first is that we pay our service members so little they're forced to enter into debt if they want a chance at middle class lifestyles. The second is that we sequester them on remote bases, where the available financial options fleece them. This must be really demoralizing for our troops. So much so that I might need more than a second bumper magnet; this might require a miniature American flag, too.
--From Ezra Klein, with love