«OHIO STATE LAW JOURNAL VOLUME 66, NUMBER 4, 2005 Predatory Lending and the Military: The Law and Geography of “Payday” Loans in Military Towns ...»
591. Ranking tenth worst on our composite ranking is another ZIP code near Tinker Air Force Base (73115), which has six additional payday lenders. The other military installations in Oklahoma have lower numbers and densities of payday lenders than we have documented elsewhere. Fort Sill’s adjacent ZIP code has seven payday lenders, which is two more than one would expect given the population, but if one were to include the numbers from Fort Sill proper, the combined number would be about on target. Phone interviews conducted with financial advisors at Fort Sill suggested very strongly that the state of Oklahoma’s registry of payday lenders is incomplete and that many of the nearby payday lenders are operating without licenses. A survey of the phone book listings in Fort Sill’s gateway town of Lawton revealed fourteen payday lenders, of which only five were on the state’s list of licensees for Lawton.
Moreover, five payday lenders that were on the state’s list of payday lenders could not be found in the phone book. By combining the lists and taking care not to double count those on both lists, the total number of payday lenders in Lawton stands at nineteen. A representative with the Consumer Credit Counseling Service in Oklahoma estimated that 20 or more payday lenders operated in Lawton as of January 2005.484
Payday lenders in South Carolina operate under the authority of the South Carolina Deferred Presentment Services Act (SCDPSA).485 Under the Act, licensed payday lenders may assess a maximum fee of 15% of the face amount of the check,486 which equates to an annual percentage interest rate of 459%.487 Lenders may issue a loan with a maximum duration of 31 days.488 The loan may not be issued for the purpose of paying off another payday loan from the same lender,489 nor may a lender renew a payday loan.490 With over 900 payday lenders491 but just over four million people, South Carolina has one of the heaviest densities of payday lenders in the country at over 22 per 100,000 people. South Carolina is home to Advance America Cash Advance Centers, Inc., one of the largest payday lenders in the country.492 Advance America operates nearly 2300 storefronts in 34 states and makes more than 1.5 million loans per year.493 In December of 2004, the company raised $322.5 million in an initial public offering on the New York Stock Exchange.494 South Carolina is also home to three significant military bases: the Fort Jackson Army Base, Shaw Air Force Base, and the Beaufort/Parris Island Marine Corps complex.
Our data, mapped at the county level, revealed that counties with a significant military presence had comparatively high numbers and densities of payday lenders. Richland County, home to the Army’s Fort Jackson had the most payday lenders among all counties statewide. Third on this list was Charleston County, where Charleston Air Force Base is located.
Though not high on the list of total payday lenders, Sumter County, home to Shaw Air Force Base, still had 13.5 more payday lenders than its population 485 S.C. CODE ANN. §§ 34-39-110 to 34-39-260 (Supp. 2004).
486 Id. § 34-39-180(E).
487 The SCDPSA allows a fee of 15%, which equates to a fee of $17.65 for every $100 loaned. Assuming an average loan duration of fourteen days, the Act authorizes an effective APR of 459%.
488 S.C. CODE ANN. § 34-39-180(A) (Supp. 2004).
489 Id. § 34-39-180(F).
491 STATE OF SOUTH CAROLINA, STATE BOARD OF FINANCIAL INSTITUTIONS, DEFERREDPRESENTMENT SERVICES LICENSEES (Dec. 12, 2003) (on file with authors) (mailed to authors by request).
492 Ieva M. Augstums, Dallas-Area Companies Expand as Payday Lending Goes Mainstream, DALLAS MORNING NEWS, Jan. 4. 2005.
788 OHIO STATE LAW JOURNAL [Vol. 66:653 would suggest, making it the third worst on a per capita basis. Sumter also ranks first in the ratio of payday lenders to banks in the state (37 to 15), giving it the worst overall ranking in the state for payday lending. Although Aiken County does not contain a military base, it had seven payday lenders beyond what one would expect, enough to serve an additional 31,000 plus people. It also has five more payday lenders than banks in the county, giving it overall the third worst record in the state. After zooming out from the map, a strong rationale for the odd number of payday lenders in Aiken County becomes evident: it is just a few miles away from the 10,000 troops stationed across the Georgia border at the Fort Gordon Army Base.
2005] PREDATORY LENDING AND THE MILITARY 789 790 OHIO STATE LAW JOURNAL [Vol. 66:653 The analysis of payday lending at the ZIP code level produced a pattern mimicking what we found at the county level. The ZIP code ranked first in the state for payday lending is Sumter (29150), which has 30 payday lenders and sixteen banks for just over 38,000 people. Statistically, one would expect to find about ten payday lenders in a ZIP code this size, even including the 5000 plus Air Force personnel stationed at Shaw Air Force base in the adjacent ZIP code.
ZIP codes within five miles of Fort Jackson’s borders also stand out. West Columbia (29169) ranks third worst in the state, Columbia (29210) ranks sixth and Columbia (29223) also scores poorly with excess capacity. Together these three ZIP codes have 48 payday lenders and only 28 banks. Adjacent to Charleston Air Force Base is North Charleston (21624), which has fifteen payday lenders, and only seven banks. This is 10.14 payday lenders above the number expected and makes this ZIP code the fifth worst in the state. The second worst ZIP code in South Carolina is North Augusta (29841), the ZIP code closest to Fort Gordon in Augusta, Georgia. Home to less than 30,000 people, North Augusta has eighteen payday lenders, more than eleven beyond statistical expectations for the population.
The Beaufort/Parris Island area deserves some notice as well. Beaufort ZIP code 29906, with four payday lenders and no banks, ranks highest in the state in terms of payday lenders per bank, and seven of the eight payday lenders in the county are within three miles of the Marine Corps Air Station. Still, our statistical analysis does not reveal the concentration of payday lending found near Marine bases elsewhere in our study. The local context provides some additional explanation that bears mentioning. Beaufort County has an unusually large number of banking facilities, more than double what is statistically expected for the population there. Much of that is due to the large excess of banks in the luxury resort town of Hilton Head. The density of banking reduces the overall ranking calculated for Beaufort County. The other likely factor in the moderate number of payday lenders in the area is the complete absence of this activity near the Marine Corps’ training facility at Parris Island. This is surely due to the Marines’ exceptional restrictions upon their boot-camp trainees, including a prohibition against having private automobiles while at Parris Island.
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16. South Dakota
South Dakota law imposes few restrictions on payday lenders operating within its borders. Lenders must be licensed with the state495 and they may not enter into payday loan transactions with borrowers who already have an outstanding payday loan.496 Further, a payday loan may not be renewed more than four times.497 However, beyond these minimal requirements, South Dakota imposes no limits on the duration of payday loans498 and no maximum interest rate so long as the parties establish the interest rate in a written agreement.499 Similar in many respects to Delaware, South Dakota is a state with a small population (755,000), a single Air Force base (Ellsworth), and a laissez faire lending and taxation tradition. Despite its sparse population, South Dakota has 448 banks and 175 payday lenders.500 South Dakota has the highest number of banks per capita in the survey and the second highest density of payday lenders per capita (23.18 per 100,000) among the states in our survey. It is possible that the banking density can be seen partly as a manifestation of the number of banks that operate in South Dakota for taxation purposes only. It is also partly a result of so many very small communities with multiple, very small banking operations. The density of payday lending statewide may also be partly a result of these conditions. At least seven South Dakota banks are currently renting their charters to lenders in states with more restrictive payday lending laws.501 Pennington County, which contains the majority of Ellsworth Air Force 495 S.D. CODIFIED LAWS § 54-4-40 (Supp. 2003).
496 Id. § 54-4-65.
498 Payday loans are referred to as “small, short-maturity loan[s] on the security of a check.” Id. § 54-4-36(12).
499 Id. § 54-3-1.1.
500 STATE OF SOUTH DAKOTA, DEPARTMENT OF REVENUE AND REGULATION, DIVISIONOF BANKING, LIST OF LICENSEES, http://www.state.sd.us/drr2/reg/bank/licensee.htm (last visited Oct. 17, 2005).
501 Joe Mahon, Banking on the Fringe: Payday and Title Loans Continue to be Popular, and States Continue to Seek Tougher Regulation for an Industry Adept at Finding Ways to Grow, FEDGAZETTE, July 2004, http://minneapolisfed.org/pubs/fedgaz/04-07/banking.cfm.
Some state officials around the country are challenging South Dakota-based lenders for violating their own state usury laws. For example, Arkansas Attorney General Mike Beebe is investigating two lenders based in South Dakota, Mount Rushmore Loan Co. and Dakota Loan Co., for entering into payday loan transactions carrying interest rates far in excess of the Arkansas constitutional usury limit. Arkansas AG Investigating Payday Lenders, Including 2 From S.D., PRESS & DAKOTAN (Yankton, S.D.), Jan. 21, 2005. Similarly, the Georgia Attorney General’s office is pursuing legal action against South Dakota-based Bank West for violations of Georgia’s payday lending law. Mahon, supra note 501.
2005] PREDATORY LENDING AND THE MILITARY 793 Base, ranks first in the state for payday lending. It has almost 90,000 residents, 28 banks, and 40 payday lenders. This is about 21 more payday lenders than the population of 90,000 people would suggest, even in South Dakota where densities are high. Pennington County, with 12% of the population, has 23% of the state’s payday lenders. It may be tempting to speculate that Pennington County’s American Indian population is another possible causal variable;
however, because this county is only about seven percent Native American, one of the lower rates in South Dakota, such speculation proves unfounded.
794 OHIO STATE LAW JOURNAL [Vol. 66:653 2005] PREDATORY LENDING AND THE MILITARY 795 At the ZIP code level, Rapid City ZIP code 57701, which borders Ellsworth Air Force Base on the west, ranks first in the state for payday lending. This ZIP code, with roughly 40,000 people and nineteen banks, has 28 payday lenders— nineteen more than its population would suggest based on statewide averages.
796 OHIO STATE LAW JOURNAL [Vol. 66:653 2005] PREDATORY LENDING AND THE MILITARY 797