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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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247 See, e.g., Ian McNutly, Fast Cash Outfits Win Enemies, NEW ORLEANS CITYBUSINESS, Jan. 21, 2002, at 1 (A[I]t was changes in state laws that opened the doors to payday lending in Louisiana and around the country. In the early 1990s, payday lenders first started showing up around Fort Polk army base in Leesville.”); Borrowers Trapped, supra 2005] PREDATORY LENDING AND THE MILITARY 691 Consumer advocacy groups have also seized on these complaints and conducted informal investigations over the merits of these claims. Steven Tripoli and Amy Mix, consumer advocates with the National Consumer Law Center, prepared a report discussing a variety of consumer scams and highpriced loans, including payday loans targeted at military service members.248 The study informally collected business newspaper advertisements, loan contracts, applications, and disclosure statements.249 The report also includes letters from military leaders complaining of the effects of payday loans and other harsh business practices on service members.250 Finally, the National Consumer Law Center researchers visited the locale surrounding Kings Bay Naval Submarine Base in southeastern Georgia and Mayport Naval Air Station nearby in northeastern Florida.251 The report concludes that predatory lending, high-priced goods and services, and other scams are plaguing military communities.252 Consumers Union, the publisher of Consumer Reports magazine, also has inquired whether payday lenders target military personnel, conducting an informal telephone survey of 31 payday lenders in six Texas cities.253 The purpose of the informal survey was to show how the payday loan processes work, rather than to collect statistical information on payday lender rates, practices, or clientele.254 The small survey sample and informal methods did not distinguish between payday loans to military and civilian customers.

Nevertheless, the report concluded that payday lenders are targeting military personnel.

Payday lenders vociferously deny these claims, attacking consumer advocacy reports as unscientific. To support their position, the Community Financial Services Association (CFSA), a payday lending industry trade association, has recently retained two public relations firms specializing in note 13 (“The [payday] loans are made by storefront businesses in ‘flashy, neon signadorned buildings (that) line the roadways surrounding the military bases, obviously targeting the serviceman....’”); Shean, supra note 14 (“Prall of the Navy-Marine Corps Relief Society said payday lenders tend to concentrate near military installations because members of the military have steady jobs and checking accounts for direct deposit of their paychecks.”); CBSNews.com, supra note 10 (“On Gen. Screven Way, the one-mile strip of fast-food joints and pawn shops leading to the front gate of Fort Stewart, getting a cash loan of $100 to $500 is about as easy as buying a cheeseburger.”).




249 Id. at 45–54.

250 Id. at 59–66.

251 Id. at 7–9.

252 Id. at 29.

253 MUECKE & SCHNEIDER, supra note 11.

254 Id. at 1–2.

692 OHIO STATE LAW JOURNAL [Vol. 66:653 reputation crisis management to influence popular perceptions of payday loans.255 These firms have issued a press release reporting a telephone survey purporting to establish that few military personnel have borrowed from payday lenders.256 In conducting the survey, the public relations firms purchased a list of military personnel from Equifax, a credit reporting agency that maintains credit histories of consumers.257 The firms then telephoned approximately 1000 military personnel, of whom 37 admitted to taking out a payday loan in the last five years.258 From this, the public relations firms concluded that 3.69% of military personnel use payday loans.259 However, this telephone survey methodology is seriously flawed for at least six reasons. First, the survey did not speak with spouses of service members, many of whom actually handle family finances, including borrowing money.260 Second, the survey ignores a classic self-response bias in that many debtors do not admit to borrowing money when approached by strangers.261 In part a result of personal embarrassment over financial problems, this self-reporting bias is a serious methodological problem that has challenged consumer credit research for over a century.262 Third, relying on a credit reporting agency for a contact list introduces serious sample problems. Many of the most financially vulnerable service members are as young as eighteen years old, and either may not yet have credit histories with Equifax, or may not be identified as military personnel in those histories. Relying on credit histories for the survey sample probably artificially selects relatively established service members, such as officers and senior enlisted personnel. Fourth, many of the most vulnerable military service members are impossible to reach through a telephone survey.

255 Press Release, Steven Schlein & Jay Leveton, Less Than 4 Percent of Military Have Taken a Payday Advance Loan Says New Survey (Feb. 3, 2004) (on file with authors).

256 Id.

257 Memorandum from Penn, Schoen & Berland Associates to Board of Directors, Community Financial Services Association of America (Jan. 26, 2005) (on file with authors).

258 Id.

259 Id.

260 Because about 65% of military service members are married, we should expect surveying only service members and not their spouses to significantly reduce reported payday loan rates from actual use. BUDDIN, supra note 4, at 4.

261 See, e.g., Jeff McDonald & Norberto Santana Jr., Payday Loans Have Financial Dark Side: High Charges Lead to Lasting Cycle of Debt, Officials Warn, SAN DIEGO UNIONTRIB., Mar. 9, 2004, at A1 (discussing refusal of approached San Diego sailor to discuss terms of payday loan).

262 See CALDER, supra note 125, at 40 (discussing Census Bureau fears that public hostility from survey questions about debt would destroy the entire 1890 census); JANET FORD, THE INDEBTED SOCIETY: CREDIT AND DEFAULT IN THE 1980S, 126–130 (1988) (empirical findings suggesting many debtors actively conceal debt problems out of embarrassment).

2005] PREDATORY LENDING AND THE MILITARY 693 Some junior enlisted personnel live in on-base barracks that lack individual telephones. Similarly, many service members are currently out of reach in combat zones overseas, even though their families may be financially struggling at home. Fifth, the survey focused on payday loans identified as such, and does not make reference to payday loans masquerading as something else, such as a “sale-lease-back” transaction or “catalog sale” loan.263 Some survey respondents may have reported not taking out a payday loan, even though they have used a “catalog sale” lender. Finally, the survey authors have not published, nor even publicly released, their survey instrument or methodology for peer review. Given that the public relations firms that commissioned and conducted the study have reputations for bare knuckle political advocacy, the veracity of the survey should perhaps be treated with some caution.264 Nevertheless, there is certainly some truth to the argument advanced by one lobbyist for payday lenders in Georgia. He asserts: “They’re not preying on anybody—they’re just open for business.”265


To date, there has been no nationwide, scientific research on whether payday lenders do in fact target military personnel. In Part III.A, we first discuss the viability of using combined geographic and legal analysis to probe issues surrounding payday lending and the military. In Part III.B, we describe our methodology in conducting an extensive empirical study of payday lending to military personnel.

A. Law and Geography: Theoretical Considerations

Interdisciplinary legal and geographic scholarship explores the relationship between law and space. It shows how law and legal institutions can manifest themselves in traceable ways across locations and boundaries. While legal rules are a product of human thought and communication, they are designed to control and influence events in the physical world. Jurists, legislators, and 263 See Gelles, supra note 141 and accompanying text.

264 Douglas Fischer, Chemical Industry May Fight Tests, OAKLAND TRIB., Nov. 21, 2003 (on file with author); see also Glen Martin, Chemical Industry Told to Get Tough:

Lobbyist=s Memo Advises Hardball Tactics for Fighting Tighter California Regulations, S.F.

CHRON., Nov. 21, 2003, at A21 (“‘They’re known for creating deceptive, phony front groups,’ Walker said. ‘They go through people’s trash; they make a policy of hiring former FBI and CIA operatives. Their motto basically is that they=re not a PR firm—you hire them when you want to win a war.’... Steven Schlein, a senior vice president with NicholsDezenhall, defended the firm’s tactics. ‘We may be aggressive in the service of our clients, but we never break the law,’ he said.”).

265 CBSNews.com, supra note 10.

694 OHIO STATE LAW JOURNAL [Vol. 66:653 administrators all perceive the physical world and craft their policies in relation to it. Thus, “law and geography” scholarship uses geographic tools to understand the consequences of legal policies and institutions. In turn, it explores the “inertia of space”Cthat is, how space shapes the process and substance of law.266 In recent years, many law and geography scholars have come to “interrogate the legal from a critical geographic perspective,” often exposing the hidden bigotries of our laws.267 These scholars sometimes draw inspiration from Foucault, who noted that “[a] whole history remains to be written of spacesCwhich would at the same time be the history of powers (both these terms in the plural)Cfrom the great strategies of geo-politics to the little tactics of the habitat,... passing via economic and political installations.”268 For example, Richard Ford has argued that race-neutral local jurisdictional boundaries are vestiges of America’s segregated past that continue to racially define residential space and in turn perpetuate a cycle of inequality independent of our private choices.269 Similarly, David Delaney has examined the way courts have used perceived geographic “facts” to provide authority for limiting constitutional protection of black school children in school desegregation cases.270 Carol Sanger has pointed out that in the post-automobile world, suburban geographic patterns and zoning ordinances have helped rigidify gender roles by creating the “chauffeur-mother.”271 Leslie Moran uses a spatial 266 Nicholas K. Blomley & Joel C. Bakan, Spacing Out: Towards a Critical Geography of Law, 30 OSGOODE HALL L.J. 661, 664 (1992). There is, of course, far too much useful law and geography scholarship to list here. For a short introduction to the still-emerging field, see

id.; David Delaney, et al., Preface: Where is Law?, in THE LEGAL GEOGRAPHIES READER:

LAW, POWER, AND SPACE xiii (Nicholas Blomley et al. eds., 2001); Jane Holder & Carolyn Harrison, Connecting Law and Geography, in LAW & GEOGRAPHY 2 (Jane Holder & Carolyn Harrison eds., 2002).

267 Delaney, et al., supra note 266, at xv.

268 Richard Thompson Ford, The Boundaries of Race: Political Geography in Legal Analysis, 107 HARV. L. REV. 1841, 1857 (1995) (quoting Michel Foucault, The Eye of Power, in POWER/KNOWLEDGE 146, 149 (Colin Gordon ed., Colin Gordon et al. trans., 1980)).

269 Id. at 1845; see also Kay J. Anderson, The Idea of Chinatown: The Power of Place and Institutional Practice in the Making of a Racial Category, 77 ANNALS ASS’N. AM.

GEOGRAPHERS 580 (1987) (exploring how legal classification of an area as AChinatown” affected discriminatory racial ideology); Richard Thompson Ford, Geography and Sovereignty: Jurisdictional Formation and Racial Segregation, 49 STAN. L. REV. 1365 (1997) (contrasting the legal treatment of electoral districts with that of local government boundaries).

270 David Delaney, The Boundaries of Responsibility: Interpretations of Geography in School Desegregation Cases, in THE LEGAL GEOGRAPHIES READER, supra note 266, at 54, 67.

271 Carol Sanger, Girls and the Getaway: Cars, Culture, and the Predicament of Gendered Space, 144 U. PA. L. REV. 705, 709 (1995).

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