Payday Loans and the Military

In 2009, the Financial Industry Regulatory Authority (FINRA) reported 21% of all military members had used a form of nonbank borrowing, and that 7% had taken out a payday loan. When it comes to junior and enlisted noncommissioned officers, 32% used nonbank lending and 11% took out an overnight payday loan. On the other hand, about 24% of civilians used nonbank lending and only 9% took out a payday loan, according to Dailyfinance.com.

MSNBC reported that part of the reason military personnel might fall for so-called "predatory lending" is because about 84% are under 25 years old, far from home, and generally unable to call their families and friends for support when they get into trouble. Another issue is a military culture that abhors irresponsible financial behavior and might punish soldiers, remove their security clearances, and even discharge them. The military does offer low-interest loans and free debt counseling, but sometimes soldiers are afraid of disciplinary action if they seek those resources.

There is the case of a sergeant who failed to make her car payments and rent. She applied and was accepted for a $500 payday loan with the understanding that she would pay back $600 in two weeks. Unable to repay, she applied and got accepted for other loans, eventually her debt escalated to $15,000.

Yet what these criticisms fail to take into account is the issue of personal responsibility. Why did she get behind on her payments? Why did she take out additional loans? Payday loans are traditionally used for unexpected emergencies, not to pay your rent. While each payday lender follows different procedures, this is an industry that helps people who have already exhausted other lending avenues—people that could end up turning to loan sharks and other illegal sources if it weren't for payday loans.

In the end, each payday loan company is different. For example, PayDayMax does not accept applications from military personnel or dependents relying upon income from military personnel.

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