MILITARY PERSONNEL TARGETED STUDY: SOLDIERS PREYED UPON BY PAYDAY LENDERS.

Byline: Jim Skeen Staff Writer

EDWARDS AIR FORCE BASE - Payday lenders are clustering around military bases, clearly showing the industry is targeting service personnel, according to a study conducted by two university professors.

Christopher Peterson, assistant professor at the University of Florida's Levin College of Law, and Steven M. Graves, assistant professor of geography at California State University, Northridge, collaborated on a study they say shows a clear link between military bases and payday lenders. The pair mapped payday-loan locations in 20 states, including 109 military bases.

``Payday-loan companies vociferously deny that they are targeting military personnel, but the numbers show that they do,'' said Peterson, an expert on comparative lending laws who has researched predatory lending in the military dating back to ancient China. ``It's sad enough to see someone get into financial trouble because someone lent him money at more than 400 percent interest. It's even worse when that borrower is a person who is fighting to protect our freedom - someone whose career can be ruined by a loan of this sort.''

After collecting data from more than 13,000 ZIP codes across the country, the study's authors found that, in almost every state, military towns ranked among the highest in number of payday lenders per capita.

Perhaps the most dramatic example in California is in Oceanside, near San Diego, home of the Marines Corps' Camp Pendleton. In a community where one would expect to find five payday lenders, there are 24 such outlets within three miles of the base.

Within the next three-mile band, only eight lenders were mapped.

While its numbers were nowhere near as dramatic as those at Oceanside, Edwards Air Force Base's neighboring community of Lancaster showed per-capita numbers of payday lenders nearly double of the state average of 6.64 payday lenders per 100,000 population.

In a state where banks outnumber payday lenders nearly three to one, Lancaster has 15 payday lenders compared with 18 banks.

``That's not a good ratio,'' Graves said.

Palmdale, by comparison, has 12 banks and six payday lenders, according to the state statistics.

``That ratio is close to what you would expect,'' Graves said.

In California, there are 2,294 payday lenders and 6,567 banks, Graves said.

In general, Air Force bases tend to have fewer payday-advance businesses around them. Air Force bases typically don't have the enormous numbers of personnel that Army and Marine Corps bases have, Graves said.

The Peterson-Graves study was featured last week in hearings in Kansas City, Mo. convened by Rep. Sam Graves, R-Mo., chairman of the House Subcommittee on Rural Enterprises, Agriculture and Technology. Graves, no relation to Steve Graves, has introduced legislation, H.R. 97, that would cap interest rates on payday advances at 36 percent.

``I don't think soldiers who serve overseas should be taken advantage of at home,'' the congressman said. ``This legislation allows companies to lend money to soldiers, but it doesn't allow them to charge 300 percent.''

The Graves bill is supported by the Association of the U.S. Army, the Fleet Reserve Association, the Armed Services, the YMCA and more than a dozen members of Congress.

Payday loans are high-interest loans intended to tide the borrower over to his next paycheck. Charges for payday loans vary, but a typical lender will charge around $17 or $18 for a two-week loan of $100. That's roughly equivalent to an annual interest rate of 450 percent, Peterson said.

Military personnel make good targets for the payday loan industry, Peterson said. Junior enlisted personnel are often in their late teens and early 20s, with low salaries and little experience managing money. Many are also married and have families.

Because the military frowns on nonpayment of debt - delinquent soldiers can face demotion, loss of security clearances and even discharge - lenders can be confident they will be repaid.

The Community Financial Services Association of America, a trade organization that represents about two-thirds of the payday lenders, strongly denies the industry is targeting military personnel. The association said that military personnel represent only about 2 percent to 3 percent of the market.

A survey conducted for the association by Penn, Schoen and Berland Associates, a polling company with offices in Washington, D.C., and New York, determined that 3.69 percent of active-duty military personnel had used a payday advance in the past five years and only 1.18 percent had an advance with outstanding debt.

Those percentages translate into about 51,000 military personnel who have used a payday advance in the past five years and 16,520 with an advance outstanding debt.

``Even though they are a small part of our market, we have a set of best practices to protect our military customers,'' said CSFA spokeswoman Lyndsey Medsker. ``Those practices include prohibiting garnishing salaries and prohibiting the contacting of customers' military commanders.''

The practices also call for deferring collection activity for any active-duty military customer deployed to a combat zone or National Guardsman or reservist called to active duty, Medsker said.

The Peterson-Graves study challenges the methodology of the CSFA study. The pollsters failed to contact spouses of military members, who often handle household finances; didn't reach those service personnel either deployed overseas or those living in dorms; and does take into account a natural reluctance to talk to strangers over the phone about debt and finances.

Jim Skeen, [phone]

james.skeen(at)dailynews.com