The average interest on payday loans in Montana, for example, is 521 percent (the sixth highest in the nation). In contrast, credit card companies generally charge about 30 percent interest for cash advances.
No wonder the military was concerned when it discovered that 20 percent of our servicemen and women use this type of loan. Last fall, Chief Master Sgt. Robert Moore at Malmstrom Air Force Base explained the problem to the Great Falls Tribune: "We expend a lot of time and energy helping them get their debts under control so they are more ready and capable to perform the mission."
Congress responded to this issue by imposing a 36-percent interest rate cap on payday loans to members of our military (the bill that included this provision passed 398-23 in the House of Representatives). Lending companies argued that the law would ultimately hurt soldiers by interfering with supply and demand and taking away a form of credit. The Pentagon didn't buy it: Soldiers would still have plenty of access to credit through credit card cash advances, small consumer loans, credit union loans, emergency assistance programs, and so on.
The troubling story of how predatory lending became a national security problem raises an important question. How can a loan be predatory and abusive when provided to one class of consumers but a healthy and beneficial part of the economy when provided to anyone else?