I'm not sure what's worse, the fact that people are taking out payday loans to buy consumer electronics, or that Congress is incapable of writing regulations to effectively limit these practices (or maybe you think Congress shouldn't and it should just be up to people individually to not fall for these terrible schemes)... either way definitely lots of shame and comedy to go around.
"Why, how dare we restrict access to credit for those who are willing to give their lives to guarantee our easy access to it!"
-- A public-service announcement by the Payday Lenders Lobby Group
The law eliminated a lot of the bad actors, but it's an arms race. Even then a few innovative lenders have arranged licensing from Native American tribes which are not subject to this federal legislation, so the problem will never go away. The short-term solution is for the base commander to declare these businesses off-limits to the troops, which usually just turns the businesses into even more attractive nuisances (and more mobile ones-- online!). The only long-term solution is financially-proficient servicemembers. How financially proficient were we when we were teenagers?
Loopholes are nothing new-- look at the Servicemembers Civil Relief Act. SCRA includes a provision which requires reducing interest rates on debt to 6%. Sounds pretty good, right? Except that when some servicemembers properly invoke their SCRA rights, unscrupulous lenders pull tricks like deferment (which allows interest to accumulate on the loan balance) or charging "fees" to comply with SCRA. A few lenders actually
raised the interest rate on low-interest debt (student loans) to 6%.
Military pay isn't huge, but it certainly isn't low with room and board allowance.
Let's say that you're the average E-2 living in the barracks. Your base pay is $1700/month before taxes. (
http://www.dfas.mil/dms/dfas/militarymembers/pdf/MilPayTable2013_1.pdf) Assuming you work 20 days per month (
Ha!) that's $85/day. Assuming an eight-hour workday (
Oh stop, yer killin' us here!) that's $10.62/hour. Yes, you have housing & food allowances, but those are calculated based on average expenses for that ZIP code so it's essentially a wash. You still "need" a smartphone, an LCD TV, an Xbox, transportation, and a liquor stipend. Oh, and recruit training was pretty rough so you have a lot of living to catch up on. Plus your sergeant is making your life miserable so you deserve to cut loose a little. It's highly likely that you've never had a credit card before, let alone a credit score, so that friendly car dealer outside the back gate ("We finance E-1 & up!!") may be your only source of capital.
I'm not an expert on teenage wages for high school graduates, but $10.62 (even with room & board) probably doesn't lend itself to building a huge emergency fund very quickly. Add in consumerism and modern marketing. Sure, most E-2s become E-3s fairly quickly, but once they get behind the debt curve then it's hard to get back above it.
And, no, it's not the military's job to train their servicemembers on financial proficiency-- only financial responsibility. (Imagine if Wal-Mart made their rank & file attend mandatory training on budgeting and the 401(k).) Servicemembers (and their leaders) have better things to do with their time. The best leaders make the time to show their troops how to gain financial proficiency, but for most the only way to gain it is through an occasional government agency (like FINRA or CFPB, for whatever that's worth) and the personal-finance industry. You know, pretty much the way it is for civilians.
