Payday lending is extremely detrimental to the well-being of our soldiers, sailors, airmen, marines and military families. That’s why military commanders and civilian leaders in North Carolina successfully sought a ban of high-interest payday loans back in 2001.
Now Senate Bill 89 would make payday lending legal again in our state. Military members, their families and those who work on military bases have been and remain targets of payday lenders and their 390 percent APR loans. Despite federal law meant to prevent payday loans from being made to military personnel and their families, there are too many reports of our troops and their families getting into trouble with these loans.
Once they fall into this type of high-interest predatory trap, they do not last long in the military. Servicemembers who cannot repay their debts can lose their security clearance and are also in violation of the Uniform Military Code of Justice. That’s the reason the military is so opposed to payday lending – it has direct and significant costs to military readiness.
The military provides financial counseling, but turning to payday loans often occurs when a military member is deployed for six to 12 months and a spouse is trying to make ends meet.
Retired Admiral Steve Abbot, head of the Navy-Marine Corps Relief Society, wrote to lawmakers last week urging them to reject payday lending in our state. We cannot afford to lose our combat-experienced military members due to payday lending.
Payday loans are small loans marketed as a quick, easy way to tide over borrowers until the next payday. However, the typical payday borrower is indebted for more than half of the year at annual interest rates of 400 percent APR. The high APR occurs because of the short duration of the loan. The average payday loan borrower pays $520 in fees on a $375 loan.
In addition, these loans are designed to keep borrowers coming back. According to the CEO of a national payday lending chain, “The theory in the business is you’ve got to get that customer in, work to turn him into a repetitive customer, long-term customer, because that’s really where the profitability is.”
Senate Bill 89 will not prevent this. The industry designed all of the so-called protections to preserve the debt trap inherent in payday lending.
Our military bases also employ thousands of civilians. According to the N.C. Department of Commerce, the defense industry is the second-largest in the state with an impact of more than $23.5 billion. We clearly should do everything we can to protect our military members and their families – and, for that matter, every North Carolina resident from payday lending.
North Carolina wants to be known as the most military-friendly state in the country. We appreciate all of the efforts to support our military and their families, but the issue of predatory lending and how the state addresses it are a major part of this designation.
It is worth noting that no state without payday lending has authorized the practice since 2005. In the last five years alone, voters in Ohio, Arizona and Montana have overwhelmingly rejected payday lending in their states when the question was on the ballot. With that track record, it is unbelievable that we would even consider letting payday lending back in our state.
We are asking the members of the House and Senate to oppose SB 89 and any form of payday lending. Not only should we be supporting the brave men and women who fight to preserve our freedom, but we also should be extending that protection to every resident of our great state.
Paul Dordal is a retired Air Force Brigadier General. Tommy Bolton is civilian aide to the Secretary of the Army for Fort Bragg.