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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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2005] PREDATORY LENDING AND THE MILITARY 741 outstanding payday loans since implementing the internet database.400 Moreover, if a borrower cannot repay a payday loan at the end of the loan’s original term, Florida’s Deferred Presentment Act also imposes strict regulations on both the lender and the borrower. First, the Act prohibits the lender from depositing the check so long as the borrower informs the lender that the check will bounce.401 Second, the lender—without any additional charge—must give the borrower a 60-day grace period to repay the loan.402 Finally, the Act requires that, as a condition of receiving the 60-day penalty-free grace period, the borrower must enter a consumer credit counseling program with a counseling agency approved by the State.403 Many payday lenders have actively sought to circumvent or ignore these rules. For example, state authorities discovered that ACE Cash Express simply chose to ignore the 390% interest rate cap.404 As explained below, our research also suggests that a significant number of Florida payday lenders may have failed to obtain licenses to operate payday loan businesses. If some lenders are not obtaining licenses, one can only speculate to what extent these and other lenders are registering their loans on the state database, or for that matter, complying with rollover limitations. Nevertheless, Florida has taken some limited enforcement measures, such as the settlement imposed on ACE Cash Express. In exchange for Florida’s withdrawing its lawsuit, ACE agreed to comply with the Deferred Presentment Act in the future and to pay $500,000 in damages: $250,000 to the state government and $250,000 to the University of Florida law school.405 In this regulatory environment, Florida has developed a payday lending industry that is relatively small, given its sizeable population of about sixteen million people, particularly in comparison to the high payday lender numbers found other southeastern states. In fact, Florida has about the same number of payday lenders as Alabama or Missouri, even though it has about ten million more people than either. Because Florida has a number of very large metropolitan regions and mostly Air Force bases, we suspected that military towns would not figure heavily in the pattern of payday lenders statewide. That suspicion is only partly supported by the data.

We conservatively estimate that there are 1071 payday lenders in the state.

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This may be an undercount. The Florida Department of Financial Services’ Office of Financial Regulation lists 1040 firms that have submitted notices to conduct business as a Deferred Presentment Provider.406 However, we found an additional 46 businesses with the word “payday” in their business name who apparently have not submitted such a notice; nonetheless, we chose to add those to our list. There were several hundred more businesses with names that suggested that they too were involved in payday lending, but we chose not to include them in order to err on the side of caution. A search of the Reference USA business database produced a list of 1172 businesses in the category of “check cashing.”407 A quick survey of this list revealed that it includes well over 75% of the same businesses as the list of Deferred Present Providers published by the State of Florida. Therefore, though we consider the official state list somewhat short of a full account of payday lending in Florida, we are nevertheless confident that it represents a highly reliable statistical sample of payday lending in the state.

Duval County, which includes the city of Jacksonville, two recently closed facilities at Whitehouse Field and Cecil Field Naval Air Stations, Jacksonville Naval Air Station, and Mayport Naval Base, ranks first in the state for payday lending. However, because Duval County is so large, it is difficult to tell at the county level if the bases are specifically targeted by the payday lending industry.

Hillsborough County is second worst statewide and, like Duval County, has a military base, MacDill Air Force Base. Yet, because the base is located in a large city, Tampa, county-level analysis does not permit a reliable inference as to whether the payday lending density is caused by the presence of military personnel. Predictably, heavily populated areas such as Broward (Miami), Polk, and Orange Counties also rank poorly on our payday lending scale. The remaining military counties of note are Bay County (ranked eighth of 67), which contains Tyndall Air Force Base; Escambia County (ranked thirteenth of 67), home to the Pensacola Naval Air Station; and Okaloosa County (ranked eighteenth of 67), which is the principal county housing Eglin Air Force Base.

Curiously, the sixth worst county is Hamilton County, which borders Georgia’s Lowndes County, home of Moody Air Force Base.

406 Office of Financial Regulation, Fla. Dept. of Financial Serv., Licensing Data Download Site, http://www.fldfs.com/OFR/licensing/download.htm (last visited Oct. 17, 2005).

407 InfoUSA, ReferenceUSA, http://www.ReferenceUSA.com (last visited Oct. 17, 2005). ReferenceUSA is a commercially-prepared internet-based database sold to corporations and libraries which contains information on U.S. and Canadian businesses, health care providers, and consumers. See id.

2005] PREDATORY LENDING AND THE MILITARY 743 744 OHIO STATE LAW JOURNAL [Vol. 66:653 At the ZIP code level, it is easier to discern the location strategy of the payday lending industry in Florida. One of the ZIP codes adjacent to the Naval Air Station in Jacksonville (32210) ranks first in the state for total number of payday lenders (eleven) and ranks fifteenth worst of 916 ZIP codes statewide.





Four and a half miles north of the base, on U.S. Highway 17, is ZIP code 32205.

This ZIP code ranks second worst in the state. Together, these two ZIP codes have approximately 87,000 people, 24 banks, and 22 payday lenders—15.2 payday lenders above the statistical prediction based on this population. The intensity of payday lending witnessed around closed military facilities is not as evident in Jacksonville as we have seen elsewhere, even though the aforementioned ZIP code 32210 does border the abandoned Cecil Field. Also in the Jacksonville area is Mayport Naval Station; with its smallish force, the area has only two payday lenders in its adjacent ZIP codes.

MacDill Air Force Base in Tampa has three payday lenders in the ZIP code adjacent to it, and although this is one more than our statistical prediction, the total number is very modest, ranking this ZIP code out of the top 100 statewide.

About five miles up U.S. 92, soldiers can find a group of Tampa ZIP codes containing over 50 payday lenders—33 more than one would predict given the population in that part of Tampa. Given its locale, this nearby density may undermine any greater payday lending density in the ZIP codes immediately adjacent to MacDill.

Tyndall Air Force Base has two adjacent ZIP codes, 32401 and 32404, that rank twenty-ninth and thirty-eighth, respectively, among Florida’s 917 ZIP code regions for payday lending. Together they have 59,000 people, sixteen banks and ten payday lenders, about six payday lenders more than statistically projected for this population.

2005] PREDATORY LENDING AND THE MILITARY 745 746 OHIO STATE LAW JOURNAL [Vol. 66:653 Eglin Air Force Base is massive and covers parts of several counties, but the ZIP code closest to the main gates at Eglin is Fort Walton Beach (ZIP 32548).

This part of Fort Walton Beach has less than 22,000 people, but eight payday lenders, which is about seven more than its smallish population would suggest.

These two statistics would likely put Fort Walton Beach in the top five statewide for payday lending, but like other resort areas, it also has a lot of banks (24) for its population, which drags the statistical composite ranking downward to forty-fourth. Mary Esther, a very small ZIP code also adjacent to the beach, is similar statistically, with only three payday lenders, but still two more than its small population would suggest.

The biggest military installation in Florida is the Air Station at Pensacola and, in relative terms, it has very few payday lenders. ZIP code 32507, which essentially encloses the base, has about 28,700 people, nine banks, and five payday lenders. This is about three lenders more than we expected given the population. This same ZIP code, though better off than most military areas, still ranks thirty-first worst out of 916 ZIP codes statewide and is much more crowded with payday lenders than the other seven ZIP codes in and around Pensacola.

Pensacola Air Station was chosen for additional street-level analysis because of its large troop levels and its peculiar infrequency of payday lending at the ZIP code level. At this resolution, we found that the greatest concentration of payday lenders in the Pensacola area was in a highway corridor just north of the base. Within three miles of the base there are at least four payday lenders, but a greater concentration of payday lending can be found if the buffer is drawn around the enlisted housing annex at Corry Station. Six payday lenders can be found within three miles of it, making it easily one of the heaviest concentrations of such activity in the region.

7. Idaho

Idaho payday loan legislation strongly favors lenders. It does not include any limitation on interest rates.408 On the contrary, like Arizona, Idaho law specifically provides that payday loan fees “shall not be deemed interest for any purpose of law.”409 Idaho allows three rollovers with a new round of fees for each.410 While lenders are not supposed to issue a payday loan for the purpose of allowing the borrower to pay off an existing payday loan from the same lender,411 the statute does not appear to address paying off one payday lender 408 IDAHO CODE § 28-46-412 (2005).

409 Id.§ 28-46-412(3). Lenders may further assess a fee of up to $20 for any check that bounces or is returned for insufficient funds. Id. § 28-46-413(3).

410 Id. §§ 28-46-413(6), 28-46-412(5)(b).

411 Id. § 28-46-413(2).

2005] PREDATORY LENDING AND THE MILITARY 747 with the proceeds of a loan from a different lender.

Idaho, with approximately 1.3 million people, is the least populous state in the survey, but still has about 160 payday lenders, or roughly 12.4 per 100,000 people.412 Idaho’s small population, both statewide and in many of the counties and ZIP codes, and the relatively small military presence in Idaho make it a curiosity in terms of our study, but perhaps representative of conditions in a rural, Mountain West state.

Mountain Home Air Force Base, home to just over 4000 troops, is in Elmore County. Elmore ranks ninth out of 44 counties in our composite score for payday lending. Mountain Home, ZIP code 83647, ranks sixth out of 251 ZIP code areas in the state with a ratio of four payday lenders to every seven banks. Although four payday lenders may seem insignificant, it is still double what one would expect in Idaho given the tiny population of Mountain Home (16,600). Two of the four payday lenders list their address as “Airbase Road,” clearly indicating their target demographic.

412 STATE OF IDAHO, DEPARTMENT OF FINANCE, PAYDAY LENDERS LIST (November 26, 2003), http://finance.state.id.us/industry/icc_lists.asp.

748 OHIO STATE LAW JOURNAL [Vol. 66:653 2005] PREDATORY LENDING AND THE MILITARY 749

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