Payday lenders are the modern day equivalent of loan sharks, aggressively marketing unaffordable loans as a way to meet a one-time need. In truth, payday lenders know that borrowers cannot both repay the loan and cover their living expenses. To do so, they will need another loan, which requires payment of another fee. This is the payday loan debt trap, where interest rates average 400 percent. The vicious cycle of debt is not a side effect of payday lending—it is the business model of payday lending.  Three-quarters of payday loan fees come from borrowers with 10 or more loans per year.
“Too many veterans are living in poverty and desperation—the exact profile of vulnerable consumers that payday lenders target,” said Dory Rand, president of Woodstock Institute. “A loan that traps veterans in an endless cycle of debt can be the final push over the edge of despair. Our veterans deserve better.”
The Department of Defense recently proposed smart new rules to protect active duty military members from payday lending. The rules enforce the Military Lending Act, a 2007 law that Illinois Representatives of both parties (Bean, Biggert, Costello, Davis, Emanuel, Gutierrez, Hyde, Johnson, Kirk, LaHood, Lipinski, Manzullo, Rush, Shimkus, and Weller) supported. The Military Lending Act came about after payday lenders sprung up like weeds around military installations such as the Naval Station Great Lakes near Waukegan, IL. So many members of the military were lured into the debt trap that the Defense Department became concerned that payday lending was a real threat to military readiness. New rules to enforce the spirit of the 2007 law became necessary because the payday industry exploited loopholes in the original rules in order to continue making 400 percent interest rate loans while still technically complying with the letter of the law.
Woodstock Institute thanks Rep. Tammy Duckworth (IL-08), a lieutenant colonel in the National Guard, for her ongoing leadership in the campaign to close loopholes in the Military Lending Act and support the strong new rules.
Given their past support for the Military Lending Act, Woodstock Institute is challenging the Illinois Congressional delegation to extend its protections for active duty personnel to veterans, both by signing on to federal legislation that would cap all loan products nationwide at 36 percent interest and by supporting the Consumer Financial Protection Bureau as it considers new rules to rein in payday lending.

Contact Katie Buitrago at or (312) 368-0310