Via NYT:
http://dealbook.nytimes.com/2013/11/21/service-members-left-vulnerable-to-payday-loans/Petty Officer First Class Vernaye Kelly winces when roughly $350 is automatically deducted from her Navy paycheck twice a month.
Month after month, the money goes to cover payments on loans with annual interest rates of nearly 40 percent. The monthly scramble — the scrimping, saving and going without — is a familiar one to her. More than a decade ago, she received her first payday loan to pay for moving expenses while her husband, a staff sergeant in the Marines, was deployed in Iraq.
Alarmed that payday lenders were preying on military members, Congress in 2006 passed a law intended to shield servicemen and women from the loans tied to a borrower’s next paycheck, which come with double-digit interest rates and can plunge customers into debt. But the law failed to help Ms. Kelly, 30, this year.
Nearly seven years since the Military Lending Act came into effect, government authorities say the law has gaps that threaten to leave hundreds of thousands of service members across the country vulnerable to potentially predatory loans — from credit pitched by retailers to pay for electronics or furniture, to auto-title loans to payday-style loans. The law, the authorities say, has not kept pace with high-interest lenders that focus on servicemen and women, both online and near bases.
“Somebody has to start caring,” said Ms. Kelly, who took out another payday loan with double-digit interest rates when her car broke down in 2005 and a couple more loans this summer to cover her existing payments. “I’m worried about the sailors who are coming up behind me.”
More at link.
40% is not bad. Payday loan companies over here tend to run at over 2000%. The most famous of them - Wonga - has scaled back it's rates to a benign 364%.
PO. Kelly is stuck in the trap that catches so many.
