Sunday, July 24, 2005

San Diego, CA - Military and state government officials have begun a crackdown on “predatory lending” businesses that target military personnel, who are often young and financially inexperienced. Wayne Strumpfer, acting commissioner of the Department of Corporations, said his agency is particularly interested in payday loan stores, which offer loans to military personnel and other customers between paychecks.

The current California state law limits the amount of a loan from one store to $300 and caps the amount of fees, but many people find they cannot repay the loan immediately and begin taking new loans to pay off their existing faxless payday loan.

Strumpfer said his agency is looking for violations of this state law. “We can shut them down” for violations, he said. The department ordered six payday loan stores closed in June for operating without licenses. One, in Lake Elsinore, had made at least 700 loans in five months.

Why the crackdown?
With fees that end up being several hundred percent APR, the average person borrowing $325 ends up paying $800, according to a report from the nonprofit Center for Responsible Lending.

In the military, these loans are particularly a problem. When 1,500 San Diego sailors were surveyed, it turned out 21% had taken out payday loans.

What is the military doing to stop this?
The Navy has established a hotline where sailors can be assured their commanding officers will not be informed of their money woes. The hotline focuses on increased education for military personnel on how to live within a budget.

This entry was posted on Sunday, July 24th, 2005 at 11:41 am and is filed under California, National.