Congress Caps Interest Rates on Payday Loans for Military Personnel

Apparently Congress has decided that payday loan businesses have been using "predatory" behavior to screw over military personnel. With loans averaging 400 percent annually (with some states allowing higher) people are falling into a financial black hole, one which sucks the money out of their pockets faster than they can make it.

I have four major problems with this legislation.

1) It's anti-capitalism. Although it's a nice gesture, I'm more of a laissez-faire economist. The market generally sorts itself out. There's a reason no one can sell a live chicken for $10,000- the market won't bear it. So the price is lowered until you find a willing buyer. This is true of all things- couches, platform shoes, antique furniture, etc. The price in a free market is what a customer is willing to pay.

If someone wants (or needs) to borrow money, they've obviously decided the "price" is good enough to do it. It might be highway robbery, but the other person doesn't have to help them in the first place.

2) It specifically targets military personnel. I admire the military, but perhaps we should pass legislation that will benefit all who use the payday loans, just not the men and women in uniform. Then again, I suppose it's okay if they use "predatory" lending practices on the guy who wanted to join the army but has a heart condition. Sheesh.

3) It fails to take into account what will happen as a result of this legislation. Either (a) payday loans will either stop giving military personnel loans- no one says they have to, or (b) they'll offset the loss in profits by ramping up the interest rates on non-military personnel. Or get one of their bazillion lawyers to find a way to tack on more "late fees" for both parties until the numbers add up. It's band-aid legislation passed around election time, meant to look good but do nothing particularly helpful.

4) Lastly, it fails to look into the reason the problem exists. Perhaps there's a reason that military personnel are forced to use payday loans? Perhaps they're not paid enough? Perhaps those who defend our right to do anything we please should make enough money where they don't have to hunt out the vultures of the lending world?

I'm sorry, that's logical and makes sense. Surely Congress would never understand.

So, instead of empowering them to direct their financial lives, we've only managed to slightly dull the moneylender's blade when he comes to take his pound of flesh. He still gets a ragged and bloody ounce, though, and the wound still bleeds just as much. However, thanks to #1 above, Congress won't raise wages until people come to the conclusion that the current salary isn't worth it, and move on. I can't imagine this story is really helping with military recruitment. Eventually, the numbers of those enlisting will force the issue to change.