California Group Urges Legislators to Pass Rate Cap For Military Payday Loans
By Paul RizzoPayday Loan Writer
According to the California Reinvestment Coalition, the men and women of the U.S. military have become prey to modern loan sharks. By that, the consumer group is talking about military payday loan organizations blanketing bases and doing all they can to trap service members in dangerous cycles of debt.
Now, California legislators have a chance to protect them in a hearing scheduled for August 8. Last month, the State Assembly passed, with a vote of 71-1, a bill with limited protections for military personnel from payday lenders.
In its current form, the bill, AB 1965, does not cap the interest rate on payday loans below the current State rate of 459 percent.
In contrast, the U.S. Senate recently passed with strong bipartisan support an amendment to the Defense Authorization bill that would cap the interest rate for all forms of credit to active duty military personnel at an APR of 36 percent, including all fees and service charges.
The California Reinvestment Coalition is concerned about payday lending and its negative effects on military personnel, low-income communities and in particular, minorities. California senators have been urged to amend AB 1965 to include a 36 percent cap on faxless payday loan interest rates.
The California Senate Judiciary Committee is holding a hearing about AB 1965, where the amendment will be considered on August 8 at 1:30 p.m. An amendment capping interest rates would help curb a practice the Defense Department has identified as one of 10 "key issues" affecting the quality of life of Service members and their families.
Maj. Gen. Michael R. Lehnert, Commanding General of Marine Corps Installations-West, said in a statement:
"Payday lenders take advantage that California has some of the weakest laws in the country. In North Carolina, payday lenders are limited to 36 percent annual percentage rates of interest. Here in San Diego we regularly see rates of 460 percent and I have seen rates as high as 920 percent being charged legally against our service members. Ultimately because we expect our Marines to be financially responsible, their ability to reenlist, compete for good jobs and keep a security clearance is affected."
The highest concentration of payday lenders in the state, 70 to be exact, surround Camp Pendleton in Southern California, where Maj. Gen. Lehnert's offices are located and more than 60,000 military and civilian personnel are stationed. In fact, consumer groups say active-duty personnel are as many as three times times more likely than civilians to take out faxless payday loans for reasons including:
- Young service members have limited financial experience
- Personnel have families with young children
- Personnel are stationed in remote locations far from family support networks
Rear Admiral Len Hering, who represents all Navy bases in California as Commander, Navy Region Southwest, echoed Lehnert's concern:
"Predatory lending practices represent a real and growing threat to the military readiness of our Navy men and women stationed in California. Ultra-easy credit; no verification of ability to repay; single ballooning payments due in two weeks; triple digit interest rates and aggressive marketing trap our sailors into cycles of debt they cannot escape on their own. If a sailor has lost control of his financial health, he has lost the ability to deploy. If he cannot deploy, military readiness is impacted. The connection between military readiness at this time when our Nation is at war and the marketing of instant payday loans outside of our gates is well established."
The California Reinvestment Coalition views the predatory targeting of military service men and women as part of a larger problem across lower-income communities and communities of color.
"It is outrageous that the State of California allows payday lenders to prey on our men and women in military service," the group said in a statement. "CRC strongly opposes payday lenders being permitted to charge usurious rates to any Californian, and urges the California Legislature to impose the proposed 36 percent cap on payday lending."
