«OHIO STATE LAW JOURNAL VOLUME 66, NUMBER 4, 2005 Predatory Lending and the Military: The Law and Geography of “Payday” Loans in Military Towns ...»
Corpus Christi has multiple bases and excess payday lending capacity.
Although the Naval Air Station is somewhat separated from the rest of Corpus Christi, it is just over three miles to a business district (ZIP code 78411) that ranks eleventh worst in Texas. It has twelve banks and twelve payday lenders, ten over statistical expectations. Adjacent to ZIP 78411 are several other ZIP codes badly overrepresented by the payday lending industry, including 78415, due south of base, which has at least eight payday lenders and only one bank for almost 40,000 people. Interestingly, there are 26 establishments with a license to make short-term loans here according to State of Texas. If they were all making payday loans, this would be one the heaviest concentrations of payday lenders in the country. Using our conservative estimate, there are at least five more payday lenders than one would expect for the local population, and about 20 extra payday lenders if we were to define them as the State of Texas does.
2005] PREDATORY LENDING AND THE MILITARY 803 There are six military bases in and around San Antonio, two of which are partially closed. Still, with over 30,000 active duty troops in Bexar County, greater San Antonio remains one of the great military towns in the country. It also ranks among the great payday lending cities in the nation. Among the six bases, all but the mostly closed Camp Bullis have an adjacent ZIP code with an unexpectedly high number of payday lenders.
The third worst ZIP code in Texas is ZIP code 78218. Here, on the northeast side of the Army’s Fort Sam Houston, there are only three banks, but eleven payday lenders. For the 30,000 people who live there, that is 8.56 more payday lenders than statistically expected. Three other nearby ZIP codes (78202, 78203 and 78220) together contain another six payday lenders and three banks, raising the total number of excess payday lenders in the area by another 3.25.
There are twelve ZIP codes adjacent to or within a few miles of Lackland and Kelly Air Force Bases, which are essentially adjoined and function together.
Three of these ZIP codes rank among the worst 30 ZIP codes statewide, and ZIP code 78238 is twelfth worst. Several of the remaining twelve nearby ZIP codes also have unexpectedly high concentrations of payday lenders. Combined, these twelve ZIP codes contain 321,000 people and 25 banks, but 40 payday lenders, which is fourteen more than the population warrants. Two ZIP codes (78227 and 78238) contain most of this excess capacity. It is very likely that these neighborhoods are where most of the personnel from Lackland and Kelly do their shopping because these ZIP codes are both within three miles of the base and straddle the Interstate 410 beltway. These two ZIP codes combined should have less than five payday lenders based on their combined population, but seventeen have set up shop here close to the service persons at Lackland-Kelly Air Force Base.
It is about seven miles between the eastern gates of Kelly Air Force Base and the western edge of Brooks Air Force Base. Lying halfway between the two and within three miles of each on Texas Loop Road 13 is ZIP code 78221. This ZIP code has five banks and eight payday lenders, almost five more than it should have given its population. Even Randolph Air Force Base in the northeastern suburbs of San Antonio has a payday lending surplus. Although fewer than 15,000 people live there and there are only five banks, four payday lenders have set up shop, which is about three too many for that population.
Soldiers stationed at Fort Bliss in El Paso may have the greatest number and variety of short-term loan options of any persons in the military. There are 182 licenses issued for El Paso County and we estimate that at least 61 of those licensees are actually making payday loans. Unlike many of the other communities we have examined, we cannot be as certain that the military is the sole focus of the payday lending industry here. Because El Paso is a border town, we believe that many of the payday lenders here are at least as involved in check cashing and currency exchanging as they are in lending. Nevertheless, this fact does not reduce the availability of high-interest, short-term loans to 804 OHIO STATE LAW JOURNAL [Vol. 66:653
There are four ZIP codes in El Paso that rank in the top 100 statewide, but only one of them, 79901, which ranks thirtieth, actually borders Mexico. This suggests that the military is at least as attractive to check casher-payday lenders as cross-border transient workers are. The more intensive payday lending activity appears to be closer to Fort Bliss. ZIP code 79925, which is partly surrounded by Fort Bliss, is the fourteenth worst in the state for payday lending.
There are about 41,000 people here and seven banks, but ten payday lenders, seven above statistical expectations. The adjacent ZIP code 79903, which also borders Ft. Bliss has three banks and three payday lenders, however, 20 companies have a license to make payday loans here, making it potentially one of the most densely crowded ZIP codes in the country for short-term loans. The ZIP code bordering the southwestern section of Fort Bliss (79904) also seems heavy on payday lenders with four, even though it has no banks, making it one of top three ZIP codes statewide in terms of the ratio of payday lenders to banks.
Fort Hood, which is one of the largest military bases in the United States, has more than its share of payday lenders lined up at its many gates, but the Killeen area is a little less saturated with payday lending than some of the other military towns in Texas. Because Fort Hood is so massive, its off-base commercial districts are a bit more scattered than those around many other bases. The main commercial district just outside Fort Hood is Killeen’s 76541 ZIP code. Here, we found eleven banks and nine payday lenders, which is about
7.3 more payday lenders than would be expected for the population in that ZIP code. Even if we added 43,000 soldiers from Fort Hood to that ZIP code’s population, we would still only expect there to be five payday lenders, four less than there are. This ZIP code ranks twenty-seventh worst statewide on our composite index but has the ninth most lenders of ZIP codes statewide. Using the State of Texas list, this ZIP code has the fourth most small-loan licenses in the state with eleven. Clearly, there are many businesses offering loans next to Fort Hood. There are other nearby ZIP codes that add to the availability of quick, high-interest loans for soldiers. Copperas Cove, other parts of Killeen, and nearby Temple, Texas all have excess payday lending capacity.
2005] PREDATORY LENDING AND THE MILITARY 807 808 OHIO STATE LAW JOURNAL [Vol. 66:653 Because Fort Hood is so large and houses so many soldiers, we chose to analyze payday lending activity in the neighborhoods surrounding it. Within three miles of Fort Hood’s perimeter, there are at least eighteen payday lenders, and thirteen of those are within one mile of base. For soldiers and their families driving east off-base using the Tank Destroyer Boulevard exit, they would leave base onto Rancier Boulevard. Before they had traveled 1000 yards past the security gates, they would pass no fewer than seven payday lenders. After that initial tangle of payday lenders, they could drive to the nearby town of Belton and only pass one more payday loan shop. If the family turned right off Tank Destroyer and went south on Fort Hood Street (Highway 195), they would pass at least three additional payday lenders before they made it to U.S. Highway 190, a mile and a half from the gates. Once they were at that intersection, within two miles in any direction they could find six additional payday lenders. If the family were to leave Fort Hood at the Clear Creek exit and drive west to the next exit off-base, they would come to Copperas Cove. Just a few feet into Copperas Cove, they would pass their first payday lender; two more are within the first mile and two additional ones are in the second mile.
2005] PREDATORY LENDING AND THE MILITARY 809 810 OHIO STATE LAW JOURNAL [Vol. 66:653
Payday lenders in Virginia operate under the authority of the Commonwealth’s Payday Loan Act (PLA).520 The lender may charge a fee no greater than fifteen percent of the amount of the loan proceeds,521 which is equivalent to an annual percentage rate of interest of 390%.522 At the end of the original loan period, a lender may not refinance, renew, or extend any loan.523 Furthermore, a lender may not extend a payday loan to the borrower to pay off a previous loan from the same lender.524 Virginia is another state with vast numbers of military personnel, rivaling California for supremacy as the leading military state. Most of Virginia’s military population is in two areas: near Washington D.C., where there are more command and intelligence personnel, and the Newport-Portsmouth region where there are many thousands of enlisted troops. Virginia ranks at the bottom of the states in terms of numbers and densities of payday lenders. Although the population numbers over seven million and there are 2434 banks, there were only about 460 payday lenders registered with state authorities in 2004.525 Statewide, there are on average 6.50 payday lenders per 100,000 people, the lowest rate of any state other than New York. This is presumably a by-product of the short history of payday lending in Virginia, where the activity was made legal on July 1, 2002. Though legal only a few years in Virginia, the densities of payday lenders around military bases differs little from what we observed in other parts of the country where it has been legal for many years.
520 VA. CODE ANN. §§ 6.1-444 to 471 (Supp. 2004). The state legislature enacted the PLA in 2002, since which time five hundred payday lending outlets have sprung up around the Commonwealth. See Bill Sizemore, State Lawmakers Want to Regulate Payday Loans, VIRGINIAN-PILOT, Jan. 22, 2005, http://home.hamptonroads.com/stories/story.cfm?story=80962&ran=135970.
521 VA. CODE ANN. § 6.1-460 (Supp. 2004).
522 A consumer borrowing $100 must write a check for $115 to cover the interest charged by the lender. Assuming an average payday loan duration of fourteen days, this 15% rate of interest equals an annual rate of interest of 390%.
Although Virginia’s usury law invalidates contracts “made for the payment of interest on a loan greater than twelve percent per year,” the law specifically exempts payday loans from its control. VA. CODE ANN. § 6.1-330.55 (Supp. 2004).
523 Id. § 6.1-459(6).
524 Id. § 6.1-459(11). Of course this provision does not prevent a lender from extending a payday loan to a borrower in order to pay off a payday loan obtained from another lender.
525 COMMONWEALTH OF VIRGINIA STATE CORPORATION COMMISSION, BUREAU OF
FINANCIAL INSTITUTIONS, PAYDAY LENDERS LICENSED VIRGINIA,IN http://www.scc.virginia.gov/division/banking/paydaylend.htm (last visited Oct. 17, 2005).
2005] PREDATORY LENDING AND THE MILITARY 811 At the county level,526 the pattern of payday lending is evidently focused on military bases. The number one county for payday lending in Virginia is Prince George County, home of the Army’s Fort Lee and Logistics Center. The population of just over 33,000 people in Prince George County is served by five banks; however, fourteen payday lenders have moved in. Prince George ranks first of 135 counties in terms of density per capita, first in density per bank, and its fourteen payday lenders are about twelve more than statistically expected for this county. Henrico County, which is about 6.5 miles north of the base on Interstate 295, ranks tenth worst in the state and offers 30 additional payday lenders.
Perhaps the most militarized region in the United States is the NorfolkPortsmouth-Newport News region. The four counties that house most of the military population in the area (Newport News, Hampton, Norfolk and Portsmouth) have a combined population of over 661,000, 63 banks, and a whopping 101 payday lenders. This stands in stark contrast to the statewide ratio of one payday lender to every five banks. Given the population in these counties, this is 56 payday lenders above what statewide averages would predict. Each of the four counties in the region ranks among the ten worst in Virginia.
526 Virginia has both counties in the classic sense and a number of municipal districts that are classified as counties by the government and are used as such in our analysis.