An online payday loan does not mix well with military personnel. Debt is a topic in which the military takes seriously. Service members are forced to repay debt with punishments enforced for those who are delinquent or do not pay. Military personnel can lose security clearance, be demoted or in some situations discharged from the armed forces.
Online payday loan lenders do know that the military are encouraged to pay their debt, which has made them an attractive borrower, especially the junior enlisted personnel. The junior members (those with the six competitive ranks and make less than $31,000 per year) make up about 75% of the military. Many of these members are young and just starting families on a low income, there are times that payday loans are appealing in order to get by to the next paycheck.
Predatory lenders, especially those with “brick and mortar” locations, are attracted to this group of customers. Their work paycheck is pretty much promised and in only rare instances would they be “fired”. The armed forces also require their personnel to have checking accounts for direct deposit. This allows the lender to make scheduled debits to their accounts. Most often, a person who enlists is not stationed in their home state, a loophole was found with the regulation of lending to permanent residents.
Many states have noticed that many payday storefront locations are close to proximity in relation to military bases. Some states have made attempts to limit the proximity between stores and bases, but payday loans continue to remain a constant unregulated presence for the military personnel.
The Military Lending Act has capped the interest amounts loaned to their personnel. Interest rates are limited to 36% as well as prohibit loans which require any type of collateral which includes vehicles, bank accounts or paychecks.
Are any online payday loan lenders doing right by the military?
Many payday loan lenders do not fall under the predatory category. Spotya! Online Payday Loans are an example of a responsible lender who chooses not to loan to military personnel. There are companies who recognize the military’s efforts to protect the soldiers and created loans based on the military loan requirements.
Being responsible lenders is a great way to protect customers in general. Yes, the military need protection while on active and inactive duty. The payday loan industry has trusted companies in “brick and mortar” locations as well as online payday loan sites. The trick for the customer is to find one who has best practices in place which will protect the customer no matter their job or location. The state regulations are set to protect the residents of the state. Some states have banned payday loans in all together, while others heavily regulate fees, interest rates and capped loan amounts. The states’ battle to regulate predatory lenders has created a new generation of responsible lenders. The limited access that some people have for loans has created a market for lenders who are not regulated by U.S. state laws. Offshore lenders and companies run by Native Americans are making money by unregulated loans to those desperate for help. Unregulated loans will attract customers as there will be larger loan amounts but have higher fees and inflamed interest rates. Borrowers will need to take on the burden of being responsible for these loans in order to keep them out of further debt. Unregulated collections practices go hand-in-hand with unregulated loans. Be careful with a loan that seems too good to be true.
