JACKSONVILLE, N.C. - Payday loans are loans that are attractively presented as a way to tie-up loose ends when funds are getting tight at the end of the month, until the next payday. This sounds good enough, but they have one catch.
These loans come with extremely high interest rates making them difficult to pay off.
The allure of extra funds until payday might sound tempting, especially for service members who are deployed and need some financial help to assist with their spouses. But make no mistake; payday loans are dangerous.
In 2001, military commanders and civilian leaders came together to keep military service members from being able to borrow money from businesses offering payday loan services, and they were successful.
The ban came after a four-year trial period starting in 1997 when North Carolina legislators passed an agreement to allow payday loan establishments to operate within the state from 1997 to 2001. After opposition and criticism of the decision began to rise, the decision was made to let the law expire after the four year window.
Interestingly enough, once the time period for allowing predatory lending was up, some businesses decided to alter their practices and made an effort to continue to operate in North Carolina.
Former North Carolina Attorney General Roy Cooper then initiated a series of legal actions to remove all predatory lending establishments from the state.
On Feb. 13, Senator Jerry Tillman proposed Senate Bill 89.
Tillman’s Bill would allow for what’s called “deferred presentment services,” which means that people receive loans in return for their next paycheck.
“This bill opens up the door right back up for payday lending in North Carolina,” said Chris Kukla, a representative with the Durham-based Center for Responsible Lending. “We kicked predatory lenders out of the state a decade ago. It makes no sense economically to let them back in.”
Opinions flare over this subject with many people posing opposition toward the proposal.
“We live in a regulated financial environment, so like it or not, we’re used to financial products being regulated, and we have some notion that a regulated product is going to be safe and helpful,” said Al Ripley of the Raleigh-based N.C. Justice Center. “Why on Earth would the state license a company to make loans to me that are harmful to me?”
One problem with the loans, critics such as Ripley say, is that the 15-percent fee translates into a triple-digit annual interest rate. Someone who pays the money back in 14 days has an annualized rate of 391 percent.
Service members who cannot repay their debts can lose their security clearance as well as be in violation of the Uniform Code of Military Justice under Article 134 which says failure to pay debt can be characterized by deceit, evasion, false promises, or other distinctly culpable circumstances indicating a deliberate nonpayment or grossly indifferent attitude toward one’s just obligations.
Overall, although the idea of having a few extra dollars is tempting, Marines have many other options when it comes to paying bills, such as the Navy-Marine Corps Relief Society, which has programs to help Marines in need.
There is no need for Marines to put themselves further into debt with a company looking to make money off of them when there are plenty of other options available to help them get back on their feet.