When it comes to veterans, the Koch brothers already have a bad track record. Bridge Project recently teamed up with VoteVets.org to expose the brothers’ front group Concerned Veterans for America, “The Vets Group That Fights Against Veterans.” Now, the Koch-backed Mercatus Center, where Charles Koch is a sitting board member, is also getting in the game, supporting policies that actively hurt service members.
In an op-ed for American Banker, Mercatus visiting scholar Thomas Miller Jr. and the Mecatus assistant director of outreach for financial policy Chad Reese argued against the Military Lending Act’s 36% annual percentage rate cap and for allowing predatory lenders to prey on service members.
Consumer advocates, regulators, and legislators must stand courageously and do what the far-sighted reformers did 100 years ago: allow for much higher interest rates on small-dollar loans. The cost to consumers is low. A 108% APR on a $300, 12-month installment loan costs only $2.94 per week more than a similar loan at a 36% APR. Consumers should have the choice to pay this additional pittance. The trifling amount can help eliminate the loan desert.
However, Miller and Reese fail to note that a 108% annual percentage rate is almost nonexistent. The Consumer Financial Protection Bureau reported that in 2013 the average APR was at 390%, more than triple Miller and Reese’s example. And the MLA first became law because predatory lenders were using those rates to target veterans and their families.
Payday lenders survive by keeping customers caught in long-term debt, and before 2007, members of the American military service were not off-limits. In fact, payday loan stores clustered around bases, promising quick cash to military families in need, who, when they borrowed from a payday lender more often than not ended up caught in debt at triple-digit interest.
Payday lenders became such a concern for service members that the Department of Defense released a report that cited problems with “military readiness” and “morale of troops” in support of the MLA.
The Kochs and their cronies at Mercatus will stop at nothing to deregulate far and wide even if it puts our veterans and our national security at risk.