K-STREET, 10,000 FEET: Private sector solutions offer military members financial hope amid predatory payday loans
THE LOWDOWN:
For our nation’s heroes, the challenge to make ends meet each month and save for the future can be quite a daunting task. A study by the Financial Industry Regulatory Authority (FINRA) reveals that 36 percent of military service members have trouble paying monthly bills.
To make ends meet, many military members take out predatory payday loans that make it hard to save money and become financially stable.
The top levels of the upper chambers are taking note, as well. A Senate leadership aide told the Reporter that almost “every Senator — and not just those on Armed Services — cares about financial literacy for veterans, especially enlisted soldiers who are victimized by predatory lending.”
For our nation’s heroes, the challenge to make ends meet each month and save for the future can be quite a daunting task. A study by the Financial Industry Regulatory Authority (FINRA) reveals that 36 percent of military service members have trouble paying monthly bills. Almost 60 percent of military personnel don’t have three months’ of living expenses saved for emergencies.
This continuing challenge for financial stability is taking its toll. A Military Family Advisory Network survey revealed that 92.5 percent of servicemembers and their families identified financial stress as a major concern, with many reporting that it hindered their focus on mission readiness.
For so many, the military represents their first full-time and first time living away from home. And that means their first time balancing a checkbook and allocating enough money for living expenses and bills each month. But a 2022 survey by the Department of Defense (DOD) found that 39 percent of active duty and 33 percent of reserve component members scored below 50 on a financial well-being scale. This data shines a light on the critical issue of financial literacy, which is not simply about managing finances, but also understanding how to leverage the right financial resources and solutions to make the most of your money.
This lack of financial literacy for service members can have a negative ripple effect for service members. Over three-quarters of military and veteran family respondents indicated they carry debt and slightly more than half of military and veteran families stated they had experienced barriers to saving money over the past two years.
So to pay bills on time and avoid exorbitant late fees, some military personnel have turned to expensive options to stay out of the cycle of debt. One 2017 study found that approximately 44 percent of service members received a payday loan, compared to just 7 percent of all consumers. This highlights the unfortunate higher prevalence of payday loans among military personnel. But when a bill needs to be paid, there are only so many available solutions. Payday lenders recognize this and often set up their stores right outside the gates of U.S. military bases.
The Military Lending Act (MLA), passed in 2006 and expanded in 2015, took some initial steps in protecting service members against predatory lending schemes. However, the MLA does not go far enough. Capping military payday lenders from exceeding a 36 percent Annual Percentage Rate (APR) is not an adequate safeguard against would-be debt collectors and still allows payday lenders to inflict material and lasting damage on the personal and professional lives of service members.
The top levels of the upper chambers are taking note, as well. A Senate leadership aide told the Reporter that almost “every Senator — and not just those on Armed Services — cares about financial literacy for veterans, especially enlisted soldiers who are victimized by predatory lending.”
“We hear their stories all the time,” the aide continued. “It's great that private-sector solutions are fixing this problem, and expect some action in the next NDAA to make sure more soldiers have access to this."
However, in the private sector, a number of America's leading employers have discovered a way to empower with a financial wellness platform to help their workers live a better financial life. For example, DailyPay believes it is easier for workers to budget and break the paycheck-to-paycheck cycle if they know what they are making and have access to their earned pay on a daily basis. Seeing their real pay in real time equips workers with the context they need to make better financial decisions. By giving workers immediate, credit-neutral, and recourse-free access to the wages they have already earned—supplemented with financial wellness tools that educate workers on how to manage their finances—DailyPay’s platform is the safest way for employees to gain real-time access to their pay.
And research underscores the positive impact it is making on workers who use it. The data from an Arizent research study commissioned by DailyPay revealed that about 7 in 10 of users who previously paid late fees do this less often or stopped completely since they started using DailyPay. Also of note, over 6 in 10 of users who previously incurred credit card interest charges do this less often or stopped completely since they started using DailyPay.
Research was also conducted to show that when utilizing DailyPay’s platform, workers no longer resorted to payday loans to make ends meet. The data shows that 95 percent of those who were previously reliant on payday loans in any way either stopped using payday loans (81 percent) or reduced use (15 percent) after using DailyPay.
The brave men and women who serve in our armed forces have made a selfless commitment to protecting us all. Now we have the opportunity to show our commitment to them by offering America’s bravest an opportunity to have choice and control over their finances so they can be the best they can be every day.
