Friday, May 17, 2013

Our Military Their Debts

A long time ago I lived in the neighborhood of Fort Jackson, the U.S. Army basic training center located near in Columbia, SC. Back in those days there was every kind of sleazy slime ready to exploit our troops that one would expect to see near a major military base except strip clubs. I guessed that had something to do with the number of Baptists in South Carolina. It just wouldn’t look right. A quick Goggle indicates nothing has changed. There are plenty of liquor stores, bars, pay day and car title loan sharking operations, gun stores, and pawn shops near the base. A Goggle on prostitution in Columbia, SC indicates the world’s oldest profession is still thriving in the shadows of the Army’s Training Command. You still have to drive a few miles to find the strip clubs. I guess the Baptists still don’t think that would look right.

Throughout history, soldiers have always been the victims of the parasites whom they defend. I don’t expect human nature to change just because I am disgusted. Our military, particularly young enlisted families don’t have a lot of spare cash. I also expect that they have other things on their minds beyond the monthly budget and the allocation of their contribution to a TSP retirement account. They have been so victimized by pay day loan companies and title loan companies that 7 years ago Congress passed the Military Lending Act which limited these loans to a 36% annual rate. Propublica reports that payday loans typically had an annual rate of 400% and one month car title loan generally ran around 100%.

This was a good start. I would not be displeased to see those protections extended to the civilian poor as well as their brethren in the military. However, as is often the case, well intentioned laws do not change the hearts of men. The usurious bloodsucking slime that operate these storefront loan companies simply changed the terms of their loans to avoid the law.

Here is an example of how things work today from the Propublica article, On Victory Drive, Soldiers Defeated by Debt.

“In June 2011, when Levon Tyler, a 37-year-old staff sergeant in the Marines, walked into Smart Choice Title Loans in Columbia, S.C., it was the first time he'd ever gone to such a place, he said. But his bills were mounting. He needed cash right away. Smart Choice agreed to lend him $1,600. In return, Tyler handed over the title to his 1998 Ford SUV and a copy of his keys. Tyler recalled the saleswoman telling him he'd probably be able to pay off the loan in a year. He said he did not scrutinize the contract he signed that day. If he had, Tyler would have seen that in exchange for that $1,600, he'd agreed to pay a total of $17,228 over two and a half years. The loan's annual percentage rate, which includes interest and fees, was 400 percent.”

The loan even contained an ingenious option as an addendum designed to circumvent the law that allowed an early pay off at 100%, exactly the same terms as the old loans before the change in the law.

Another company, Community Loans, has been sued for flagrantly disregarding this law. Their defense? The soldier sells his vehicle to the company while retaining the option to buy back the car at a higher price, making the transaction a sale not a loan. A lower court has rejected this argument. One of the soldiers named in the suit won a Purple Heart but lost his car to a company without a heart. This is just plain wrong.

The laws against usury need to be tightened up. These predatory loan companies victimize the helpless, the desperate, and the ignorant. How about a cap of 36% on any kind of loan made to a member of one of our Uniform Services? If a company can’t turn a profit on a portfolio of collateralized loans at an APR of 36%, they don’t deserve to be in business.

I have heard that more members of our military lose their security clearances to debt problems than to any other cause. In many military specialties the loss of a security clearance is the end of a career. For this reason members of our military are reluctant to expose their problems to their commanding officers. It is not like the officers in our military do not already have enough on their plate, but I hope they will counsel and help their troops out of their debt problems rather than add to their woes. This kind of openness should include some kind of get out of jail free pass, especially for first time victims of predatory loan scams. As with all social problems in our military this will not happen without pressure from flag officers and the civilian Secretaries of the services.

The article notes, “Soldiers who hide their debt often forego the military's special aid options. Army Emergency Relief and the Navy-Marine Corps Relief Society offer zero-interest loans. But in seeking that help, a soldier risks alerting the commanding officer to his or her troubles, particularly if the sum needed is a large one.”

Until changes in law can be enacted, perhaps a debt/compound interest module needs to be added to the training required by our military. As a civilian employee of the Department of the Navy I was required to take the same training on human trafficking given to uniformed members of that service. It is a good thing to tell a 19 year old sailor on his first liberty after six months at sea, “Don’t get drunk with whores.” Perhaps similar warnings should be given to keep them away from storefront loan sharks.

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