Payday advance institutions have sprung up in large numbers near many California military bases, according to the Antelope Valley Press. Lawmakers believe they are targeting the state's military families, which become financially vulnerable when a member is sent overseas.

"We discovered a lot of younger enlisted folks were being taken advantage of by payday lenders," said Ted Lieu, a Torrance Democrat who serves in the Air Force Reserve and spent four years on active duty. "Many payday lenders are professional and do everything above board, but many do not."

Lieu has introduced Assembly Bill 1965 — which would require cash advance loan companies to abide by strict regulations when following up with members of the armed forces who have outstanding balances, including deferring collection activity against members who have been deployed (and spouses) — to protect the state's military personnel.

Payday cash loan providers generally offer a loan to a borrower in advance of the borrower's next payday. California law limits the amount to $300 per store, and limits the fee to $15 for every $100 borrowed. But when borrowers don't repay the fast cash advance when it's due, added fees and interest can escalate out of control.

A study by university professors Christopher L. Peterson of the University of Florida and Stephen Graves of CSU-Northridge found that the five California counties most densely packed with payday advance companies all have active, or recently closed, military bases. A surprising 14 of the 20 ZIP codes with the most payday lenders are within five miles of an active or recently closed base.

Oceanside, near Camp Pendleton in Southern California, has 22 payday lenders — far more than would be expected in such an affluent area. For the record, an Edwards Air Force Base spokesman said he wasn't aware of a problem with base personnel and any payday companies.

Assembly Bill 1965 would prohibit payday advance lenders from garnishing a military member's salary and prohibits contacting the borrower's superior officers in order to receive payment. The bill also requires the lending company to honor all terms and agreements of any replacement arrangement worked out between a member of the armed services or military / third-party credit counseling agency.
At least in the early going, the legislation is garnering bipartisan support.

"In concept, yes, I (support) whatever we can do to help our military families get by for that time that they're away from their families," said Sharon Runner, a Lancaster Republican.

The California bill is expected to be heard in committee in late March or early April. All three West Coast states have been in the news with proposed payday regulations lately. An Oregon payday loan bill is also being pushed by that state's consumer advocates, and a little farther north, a controversial piece of Washington payday loan legislation has also been hotly contested.

In response to a scathing San Francisco Bay Guardian editorial regarding payday loan firms, a reader — who happens to be a Senior V.P. of the Community Financial Services Association of America — takes the publication to task over a couple of missed facts.

First of all, contrary to popular belief, she asserts that payday advance customers are not poor. Research shows they are often middle-income, educated, working people — more than half of whom make between $25,000 and $50,000 annually. About 58 percent of applicants have attended some college, and nearly 100 percent have a bank relationship, as a personal checking or savings account, along with a steady income, is required to get a payday advance.

The Guardian references the millions in revenues being "pocketed" by payday lenders, which shows a disregard for the facts. Short-term loans are actually expensive to originate, and the revenue of payday companies is simply the total amount of fees collected. All operating expenses — employee payroll and benefits, rent, utilities, loan losses, et cetera — must be subtracted from that sum.

Because banks and payday advance lenders offer different services, it is inaccurate to assume the physical presence or absence of one affects the other, as the Guardian asserts. A payday loan is a small cash advance for people needing help between paychecks. The demand for this product was created because banks stopped making short-term loans, not because they moved out of low-income neighborhoods.

Millions of consumers choose payday loans as convenient alternatives to bounced checks and overdraft fees, or late penalties on credit cards. They find payday loans easier than asking family or hocking their possessions at pawn shops. Customer satisfaction figures exceed 80 percent.

The Community Financial Services Association of America has worked in 38 states, including California, with lawmakers who wish to support consumer protection. The association believes Californians are best served when given a variety of options — as well as the full disclosure of facts — and then trusted to make financial decisions based on what's best for themselves.

The California Department of Corporations announced it has settled administrative actions against Los Angeles resident Saverio Lanni for making more than 3,000 payday loans without a state license.

Operating under a fictitious business name, Check Exchange, Lanni violated the California Deferred Deposit Transaction Law by making payday loans during the period of January-August 2005. The bogus business operated through four stores, two of which were located in Hemet, and one each in Fontana and Lomita.

"Our department will vigorously pursue repeat violators who flagrantly refuse to abide by laws designed to protect consumers. There are dire consequences to their unlicensed activity," acting Corporations Commissioner Wayne Strumpfer said.

It gets worse for Lanni. In Check Exchange's license application to operate as a payday loan agency, he falsely claimed that he had never been subject to an enforcement action in California and had never had a business license revoked — both of which are blatantly untrue. In January 1980, the California Department of Real Estate revoked Lanni's license as a salesman.

As a result of the settlement, Lanni's pending applications for a license as a payday lender were denied. He agreed not to challenge the desist-and-refrain order previously imposed by the state agency, which also orders Lanni not to engage in any unlicensed payday loan activity.

Furthermore, the Department of Corporations has obtained a preliminary injunction against both Check Exchange and Lanni, an action that is still pending in Los Angeles Superior Court. That action seeks a permanent injunction against Check Exchange from operating a payday loan store without a license and also seeks to impose civil penalties.

It's good news for consumers in Southern California that the state has halted the activities of this unlicensed and facetious agency. When and if a consumer decides to obtain a payday loan, it should always be from a licensed provider.

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.