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«OHIO STATE LAW JOURNAL VOLUME 66, NUMBER 4, 2005 Predatory Lending and the Military: The Law and Geography of “Payday” Loans in Military Towns ...»

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VOLUME 66, NUMBER 4, 2005

Predatory Lending and the Military:

The Law and Geography of “Payday” Loans in

Military Towns


A heated national debate has developed over whether one type of high-cost

predatory lender, commonly known as “payday lenders,” target financially

vulnerable military families and whether the law protects them from such predation. Writing within the relatively new interdisciplinary “law and geography” movement, this Article provides geographic evidence that payday lenders do aggressively target American military personnel, irrespective of most forms of legal regulation.

This Article first provides a comprehensive introduction to payday lending business practices and to the financial vulnerability of military personnel.

Next, this Article presents empirical research gathered from an examination of 20 states, 1516 counties, 13,253 ZIP codes, nearly 15,000 payday lenders, and 109 military bases. High concentrations of payday lending businesses in counties, ZIP codes, and neighborhoods in close proximity to military bases were found. Observations were controlled by comparing the density of payday lender locations to bank locations.

Each of the 20 states studied had a different legal and regulatory strategy for addressing payday lending. However, the only regulatory strategy which prevented payday lenders from targeting military personnel was the aggressive and consistent enforcement of civil and criminal usury law. Going beyond the debate over predatory lending to military personnel, this research provides a realist check on pure legal reasoning and unfounded faith in current consumer protection rules.

∗Assistant Professor of Geography, California State University, Northridge. The author gratefully acknowledges generous financial assistance from the College of Social and Behavioral Sciences at California State University, Northridge.

**Assistant Professor of Law, University of Florida, Frederic G. Levin College of Law. The author wishes to thank the following for helpful conversations, comments, encouragement, research assistance, and suggestions: Reed Clary, Lynn Drysdale, Mark Fenster, Diana Henriques, Lyrissa Lidsky, Diane Mazur, Tera Peterson, Buddy Schulz, Sarah Stoddard, Michael Wolf, and Barbara Woodhouse. Special thanks to Blake Delaney for exceptionally thorough and helpful research assistance.





A. Payday Lending

1. What Are Payday Loans?

2. Payday Lending in History: Ancient Lineage and Recent Resurgence

B. Financial Vulnerability of Military Personnel

1. Demographic Predisposition

2. The Military Compensation System

3. The Dislocation of Military Service Members

4. Military Culture and Financial Obligations

C. Payday Lending to Military Personnel

1. Congress’s Position: The Servicemembers’ Civil Relief Act. 686

2. The Debate: Do Payday Lenders Target Military Service Members?


A. Law and Geography: Theoretical Considerations

B. Empirical Methodology

1. Study Overview: Sample, Scales of Resolution, and Control Group

2. Data Sources and Mapping Techniques

3. Statistical Analysis of Payday Lender Location Density........ 701



A. Federal Banking Law and the Marquette Doctrine: A Backdrop to American Payday Lending

B. State Law and Empirical Results

1. Alabama

2. Arizona

3. California

4. Colorado

5. Delaware

6. Florida

7. Idaho

8. Kentucky

9. Louisiana


10. Missouri

11. New York

12. North Carolina

13. Ohio

14. Oklahoma

15. South Carolina

16. South Dakota

17. Tennessee

18. Texas

19. Virginia

20. Washington


A. Empirical Discussion

B. Legal and Public Policy Considerations

1. Voluntary Compliance and Industry Best Practices............... 825

2. State Law

3. Federal Law

4. Military Leadership on Payday Lending



“Support the troops” has become a national rallying cry. Because we live in a complex and dangerous world, we as a society rely on the military to protect us. President George W. Bush recently stated that “Americans live in freedom because of our veterans’ courage, dedication to duty, and love of country.”1 This sentiment speaks to the fundamental debt of honor and respect we owe the women and men who make great sacrifices, sometimes the ultimate sacrifice, to protect us.2 In satisfying this debt, the United States expends vast resources in caring for current and former military personnel and their families.3 The 1 President George W. Bush, Proclamation on Veterans Day (Nov. 9, 2004) (transcript available at http://www.whitehouse.gov/news/releases/2004/11/20041109-5.html).


EARLY MEDIEVAL AND MODERN TIMES 103–08 (1993) (discussing differing social approaches to reassimilating returning veterans with complex emotional and moral problems).

3 One commentator has emphasized the relative cost of family support programs:

–  –  –

Department of Defense maintains a comprehensive system of social services aiming to meet every need of every member of every armed service family.4 Nevertheless, profound questions remain about the extent and nature of our support of military personnel. In recent years, scholars have asked compelling questions about the quality of life and overall well-being of military families.5 submarines, and aircraft. It exceeds what the Army, Navy, and Air Force each spend on their worldwide operations in a year. It equals nearly half of the Army’s total budget.

John Luddy, Meet the U.S. Government=s Biggest Family Welfare Program, AM.

ENTERPRISE, May/June 1996, at 63.

4 These programs include: a system of worship services, locations, and chaplains, government housing, housing subsidies, cost of living salary adjustments, and relocation assistance programs, day care, youth activities, child development programs, and singleparent support programs; mental health, substance abuse, suicide prevention, marital, family, legal, and financial counseling; recreation, fitness, and entertainment opportunities, commissaries and subsistence allowances, and a comprehensive medical and dental system for military personnel, their families, and veterans. RICHARD BUDDIN, BUILDING A


1–2 (Rand Publication Series MR-916-OSD, 1998); M. AUDREY BURNAM ET AL., ARMY FAMILIES AND SOLDIER READINESS 7 (Rand Publication Series R-3884-A, 1992); Sondra Albano, Military Recognition of Family Concerns: Revolutionary War to 1993, 20 ARMED FORCES & SOC’Y 283, 297 (1994).

5 See, e.g., MARGARET C. HARRELL, INVISIBLE WOMEN: JUNIOR ENLISTED ARMY WIVES 110–11 (2000) (describing financial deprivation, isolation, and invisibility of spouses of junior enlisted personnel); CATHERINE LUTZ, HOMEFRONT: A MILITARY CITY AND THE AMERICAN TWENTIETH CENTURY 7–9 (2001) (describing the complex and troubling relationship between military installations and military towns); PETER A. MORRISON ET AL., FAMILIES IN THE ARMY: LOOKING AHEAD 49–51 (Rand Publication Series R-3691-A, 1989) (discussing stresses placed on military families); Gary L. Bowen et al., Family Adaptation of Single Parents in the United States Army: An Empirical Analysis of Work Stressors and Adaptive Resources, 42 FAM. REL. 293, 302–03 (1993) (emphasizing need for greater social support resources for single parent Army families); BURNAM, supra note 4, at 75 (finding that “[t]he proportion of soldiers screening positive for depression... is three to four times higher than that among civilians with similar gender and age characteristics”); James A.

Martin & Dennis K. Orthner, The “Company Town” in Transition: Rebuilding Military Communities, in THE ORGANIZATION FAMILY: WORK AND FAMILY LINKAGES IN THE U.S.

MILITARY 163, 172–74 (Gary L. Bowen & Dennis K. Orthner eds., 1989) (discussing morale problems stemming from isolated, tightly controlled, “company town” military installations);

Dennis K. Orthner et al., Growing Up in an Organization Family, in THE ORGANIZATION FAMILY: WORK AND FAMILY LINKAGES IN THE U.S. MILITARY, supra, at 137 (discussing inadequacy of military programs treating stress placed on children and adolescents of military families); Mario R. Schwabe & Florence W. Kaslow, Violence in the Military Family, in THE MILITARY FAMILY: DYNAMICS AND TREATMENT 125, 129–30 (Florence W.

Kaslow & Richard I. Ridenour eds., 1984) (discussing social, economic, and demographic risk factors for military family violence); Theodore G. Williams, Substance Misuse and Alcoholism in the Military Family, in THE MILITARY FAMILY: DYNAMICS AND TREATMENT, supra, at 73, 77 (noting evidence of high incidence of alcoholic fathers amongst military family dependents).

2005] PREDATORY LENDING AND THE MILITARY 657 Recent events, such as soldier discontent over unarmored vehicles in Iraq, have heightened these concerns.6 Similarly, many have pointed to unfairness over the military’s use of stop-loss orders to impose extended tours of duty.7 Closer to home, recent studies have increasingly found many members of the armed forces suffer a long-term earnings penalty later in life.8 Several commentators have suggested that military personnel may be targeted for a variety of consumer scams, such as over-priced insurance and sham investments.9 Similarly, a heated national debate has developed over whether abusive high-cost lenders are targeting financially vulnerable military families.10 Consumer advocates and the media have accused one group of lenders, commonly known as payday lenders, of causing particular trouble for enlisted military personnel.11 For instance, a front page New York Times article 6 See Julian E. Barnes, A Well-Aimed Question, U.S. NEWS & WORLD REP., Dec. 20, 2004, at 16; Charisse Jones, Soldier Says He’d ‘Feel Safer in a Volvo’: Military Families Criticize Use of Unarmored Vehicles, USA TODAY, Dec. 9, 2004, at 2A.

7 See Mark Fisher, Hobson: Treat Military Fairly: Regular Troops Can Leave, but Not Guard, Reserve, DAYTON DAILY NEWS, Jan. 4, 2004, at B1; Jones, supra note 6.

8 Alan B. Krueger, Warning: Military Service Can Be a Drain on Later Earning Power in Civilian Life, N.Y. TIMES, Nov. 11, 2004, at C2. This stands in stark contrast to the World War II era when military service provided disadvantaged young men “an unprecedented opportunity to better their lives through on-the-job training and further education.” Robert J.

Sampson & John H. Laub, Socioeconomic Achievement in the Life Course of Disadvantaged Men: Military Service as a Turning Point, Circa 1940-1965, 61 AM. SOC. REV. 347, 364 (1996). In contrast to the massive social intervention of the GI bill, today “policy has regressed to the point at which, for some segments of society, imprisonment is the major governmental intervention in the transition to young adulthood.” Id. at 365; see also Robert L. Phillips et al., The Economic Returns to Military Service: Race-Ethnic Differences, 73 SOC. SCI. Q. 340, 340 (1992) (showing no significant post-service earnings benefit from military service for blacks and Hispanics).

9 Paul K. Davis, Fighting Consumer Frauds Which Target Military Personnel, DIALOGUE, Winter 2001, at 7.

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