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Kim Lamb • LVN illustration
Critics call it legalized loan-sharking.
Supporters call it a needed public service.
Whatever the view, payday loan companies are finding themselves under increasing scrutiny in the wake of a new federal law that caps the interest rates they can charge members of the military.
The Talent-Nelson Amendment, passed by Congress last September, will cap the interest rates on short-term loans to the military at 36 percent when it takes effect next October. While that rate is many times more than banks charge for commercial loans, some payday loan companies are making no apologies for charging as much as 800 percent.
Mary Marshall, manager of Cash Mart, one of 13 payday loan companies in Fallon, said her store charges an annual rate of 521.43 percent.
"I put it in big letters on their paperwork," she said.
Supporters call it a needed public service.
Whatever the view, payday loan companies are finding themselves under increasing scrutiny in the wake of a new federal law that caps the interest rates they can charge members of the military.
The Talent-Nelson Amendment, passed by Congress last September, will cap the interest rates on short-term loans to the military at 36 percent when it takes effect next October. While that rate is many times more than banks charge for commercial loans, some payday loan companies are making no apologies for charging as much as 800 percent.
Mary Marshall, manager of Cash Mart, one of 13 payday loan companies in Fallon, said her store charges an annual rate of 521.43 percent.
"I put it in big letters on their paperwork," she said.
The Pentagon argues that such rates pose a threat to its personnel and, in turn, a threat to national security. Good financial health is one criteria by which personnel are deemed eligible for the security clearances they need for overseas deployment. The military is also concerned that those who are in deep financial trouble might be tempted to sell secrets to enemy forces.
In fact, the U.S. Navy Military Protection Task Force noted that the number of sailors who were denied security clearances because of excessive debt rose from 124 in the year 2000 to 1,999 in 2005.
That is one of the reasons why the Navy will support efforts by Nevada Assembly Speaker Barbara Buckley and others to incorporate the federal standard into state statutes, said Zip Upham, public information officer at Naval Air Station Fallon.
"If you break this federal law, you also break Nevada state law ... that's all we need," said Upham.
Buckley, D-Las Vegas, led efforts to reform the payday loan industry in the 2005 Legislative session and has said she wants to give the state more enforcement powers in the 2007 session, according to press reports.
The payday loan industry seems willing to go along with efforts to restrict lending practices to the military to keep restrictions from spreading to the general public.
In fact, the U.S. Navy Military Protection Task Force noted that the number of sailors who were denied security clearances because of excessive debt rose from 124 in the year 2000 to 1,999 in 2005.
That is one of the reasons why the Navy will support efforts by Nevada Assembly Speaker Barbara Buckley and others to incorporate the federal standard into state statutes, said Zip Upham, public information officer at Naval Air Station Fallon.
"If you break this federal law, you also break Nevada state law ... that's all we need," said Upham.
Buckley, D-Las Vegas, led efforts to reform the payday loan industry in the 2005 Legislative session and has said she wants to give the state more enforcement powers in the 2007 session, according to press reports.
The payday loan industry seems willing to go along with efforts to restrict lending practices to the military to keep restrictions from spreading to the general public.
Connie Jordan, president of Fallon's Quick Checks Payday and Title Loans, said her company does not make loans to active members of the military.
"It's not good for them or for us," said Jordan, who used to make loans to Navy personnel but found that the rotation of carrier air groups in Fallon was so frequent that catering to that clientele "was more trouble than it was worth." Jordan is also cognizant of the political pressures from consumer groups and believes her industry needs to do a better job of policing itself to avoid more onerous legislative consequences.
"We're trying to stay in a good safe spot so we don't have any of those horror stories" involving military bankruptcies, she said.
In addition to such efforts, the payday loan industry recently launched an aggressive television campaign urging consumers to borrow responsibly.
Marshall welcomes that approach.
"(Payday loans) are great for what they're designed for," she said, "... if your car breaks down or your gas bill comes in higher than expected. This is not a banking service. This is a payday loan service. If you used it for what it's designed for - a payday advance - then it's a great system. It's too easy to say 'I want to go gambling' or 'I want to go out for something to eat.' That's when people get in trouble."
"It's not good for them or for us," said Jordan, who used to make loans to Navy personnel but found that the rotation of carrier air groups in Fallon was so frequent that catering to that clientele "was more trouble than it was worth." Jordan is also cognizant of the political pressures from consumer groups and believes her industry needs to do a better job of policing itself to avoid more onerous legislative consequences.
"We're trying to stay in a good safe spot so we don't have any of those horror stories" involving military bankruptcies, she said.
In addition to such efforts, the payday loan industry recently launched an aggressive television campaign urging consumers to borrow responsibly.
Marshall welcomes that approach.
"(Payday loans) are great for what they're designed for," she said, "... if your car breaks down or your gas bill comes in higher than expected. This is not a banking service. This is a payday loan service. If you used it for what it's designed for - a payday advance - then it's a great system. It's too easy to say 'I want to go gambling' or 'I want to go out for something to eat.' That's when people get in trouble."
Marshall and Jordan said the payday loan industry is offering a much-needed service to people who might otherwise have nowhere else to turn for cash.
"We're doing a service for people who can't go anywhere else," said Jordan. "They can't call mom and dad, can't go to the bank, they just have nowhere else to go."
Even at the high interest rates, Marshall argues, getting a short-term loan can be less than paying the bank fees on a couple of bounced checks.
"I'd happily borrow $300 to keep from paying an NSF fee," she said.
If a person wants a payday loan from Jordan's Quick Checks, all they have to do is provide a pay stub, a bank account, driver's license and proof of Nevada residence. If a person borrows $300, he or she gives Jordan a "post-dated" check for $375 that she is free to deposit 14 days later. If they are unable to repay on time, they can file for up to six extensions to be repaid up to a maximum of six months. Jordan defends the high interest rate, saying it is in line with the risk of the loan, which by nature often involves customers with poor credit scores.
"We have a pretty loyal customer base," she said, "but you do have a challenge with people who don't want to pay you."
"We're doing a service for people who can't go anywhere else," said Jordan. "They can't call mom and dad, can't go to the bank, they just have nowhere else to go."
Even at the high interest rates, Marshall argues, getting a short-term loan can be less than paying the bank fees on a couple of bounced checks.
"I'd happily borrow $300 to keep from paying an NSF fee," she said.
If a person wants a payday loan from Jordan's Quick Checks, all they have to do is provide a pay stub, a bank account, driver's license and proof of Nevada residence. If a person borrows $300, he or she gives Jordan a "post-dated" check for $375 that she is free to deposit 14 days later. If they are unable to repay on time, they can file for up to six extensions to be repaid up to a maximum of six months. Jordan defends the high interest rate, saying it is in line with the risk of the loan, which by nature often involves customers with poor credit scores.
"We have a pretty loyal customer base," she said, "but you do have a challenge with people who don't want to pay you."
