According to a story in the Union-Tribune, military leaders will press state legislators today to protect the hundreds of thousands of young and impressionable service members who are prime targets for payday loans, which often charge a maximum annual rate of 459 percent.

 
The armed forces' top commanders see military payday loans, in which consumers pay an upfront fee for an advance on their next paycheck, as an increasingly unpatriotic distraction from war operations.

Their reasoning? Service members are often financially unsophisticated, which makes it easier for them to fall into a cycle of debt. Such financial troubles are creating challenges for morale and other aspects of war readiness, the military brass said.

“We've had to remove sailors from sensitive positions handling millions of dollars' worth of equipment until their financial problems can be taken care of,” said Navy Capt. Mark Patton, a Point Loma Naval Base commander who will represent 90,000 sailors at today's hearing.

Cheap payday loans and other high-interest financial transactions are the subject of a joint Assembly and Senate hearing titled “Protecting Our Protectors: Confronting Consumer Scams Aimed at the Military.” Active-duty personnel are three times more likely than civilians to take out a payday loan, according to a 2005 report by the Center for Responsible Lending in Durham, N.C. It estimated that 225,000 service members nationwide had done so in 2004.

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Elizabeth Lawson's troubles began with an $800 heating bill, but it was her next move that sent her finances spinning out of control, according to a comprehensive MSNBC report.

Lawson, of Shawsville, Va., went to a store in nearby Christiansburg that offers payday loans to buyers in need of quick cash. She borrowed $200, agreeing to pay a $36 charge once she received her next Social Security check. Then Lawson, 49, began juggling, taking out a new loan repeatedly to pay off existing payday loans. In 2004 and 2005, she and her husband took out more than five loans with various lenders.

With all the fees and interest, she expects her financial problems to result in bankruptcy.

"We'd pay them off and immediately reborrow to just have money to make the house payment. It got to where it was just impossible to keep up," Lawson said.

Revolving-door loans like Lawson's have become quite commonplace in the growing payday loan industry, which is permitted to charge interest at triple-digit annual average rates in about 38 states.

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It's not difficult to track down online payday loans. Companies abound on the Internet. Many of these services, however, charge unfathomable interest rates, an APR in the triple digits. What's a consumer in need to do?

Consider Prosper.com. An online marketplace, this website is bringing individuals in need together. It's akin to a dating service, with money taking the place of love. Instead of dealing with lenders that charge such high interest rates on their payday loans, you can work out a deal with another Average Joe.

Prosper bills itself as an Internet-age alternative to such creditors. The system, which has been in operation since February, could be considered revolutionary and unrealistic - stranger are meant to meet and executive legitimate transactions in an anonymous environment. It's similar to eBay, but with large amount of cash changing hands.

If this experiment succeds, the credit industry would be in trouble. Borrowers who've denied on the payday advance market could find money at reasonable interest rates. Right now, Prosper takes a small cut of the deal. (Borrowers pay 1 percent of each loan and lenders pay .5 percent on the money owed to them.)

Local payday loan firms and their customers have been waiting longer than usual for their day in court lately. According to Cynthia Sanders, chief clerk of the McKinley County (N.M.) Magistrate Court, two judges have recused themselves from all cases involving the payday loan business for the past three weeks.

While it's not unheard of for judges to recuse themselves from an entire category of cases, said Karen Janes, director of the Magistrate Court Division of the state's Administrative Office of the Courts, it is an unusual development.

"This is the first time I've seen it," said Sanders, a 25-year veteran of the court.

The McKinley County Magistrate Court deals with dozens of instant payday loan firms seeking to garnish the salaries of delinquent customers every week. When judges recuse themselves, it falls on the county's district court to find judges in other counties to hear the case. If things go smoothly, the search shouldn't last more than a few weeks. If not, however, it can take months.

Judge John Carey declined to comment on the reasons for his recusals. Judge George Galanis summed up his decision in one word.

"Unconscionable is the key word here," he said, referring to his take on the terms most lenders demand for payday loans.

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Looking around the 12th District, Alderman Aron Wisneski said he and his neighbors have noticed a proliferation in west Racine of a certain type of business - payday loan stores.

"We all started to remark how these places were popping up like mushrooms in the rain," Wisneski told the Milwauke Journal Sentinel.

Meanwhile, Ald. Greg Helding, representing the 11th District, was concerned about what he was hearing was happening to some people who use bad credit payday loans in general.

"I talked to one person whose sister was basically ruined by such establishments," Helding said.

The two aldermen decided to try to do something about it. Their first step was to propose a 90-day moratorium on any new quick cash loan businesses. The proposal won unanimous support from the Common Council last week.

A study by the state Department of Financial Institutions found there were about a dozen payday loan stores in the entire state in 1995; by 2005, there were more than 400.

In Racine, there are about a dozen payday loan stores, several within blocks of each other. Helding said he is concerned that these businesses are taking advantage of people who are already struggling financially by charging exorbitant interest rates.

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Being charged upwards of 60 percent interest for an advance on one's paycheck is a notion Rob Fleming finds offensive.

Neverthless, the majority of cash advance establishments doing business in Greater Victoria are charging just that and then some. While the ceiling under the Criminal Code of Canada is 60 per cent interest, the added fees and finance charges tacked on to long-term payday loans make the cost of borrowing through such companies exorbitant. In essence, Fleming said, they are operating outside of the law.

"It's a situation where prosecutions are extremely unlikely, but what we've had is a free for all where people are getting gouged," the Victoria-Hillside MLA said.

In the Capital Region alone there are more than a dozen companies not attached to banks or credit unions offering such services as payday loans, injury advances, telephone reconnect loans - essentially cash in pocket for the consumer.

Last week Fleming introduced a private member's bill in the legislature that he said would lay the groundwork for the province to regulate interest rates among other conditions related to the fast payday loan industry.

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Another week, another press released from My Payday Loan. Let's hear what the cash advance company has to say now:

With the increasing number of applications for payday loans coming in, a new customer call centre and response department has been hired to beef up the team and continue the high levels of customer service for which My Payday Loan is known.

Over the past week, four new staff have been trained in the company’s core payday loan lending business, focusing on quick customer response and dealing purely with customer enquiries. The new call centre team is going to be managed directly by Chief Operating Officer, Kirsty Auchincloss who explains:

“Customer service has always been at the fore here at My Payday Loan. Customers needing cash advances until their next payday are not only looking for speed and ease of use but also to know that they are dealing with a reputable company online.

My Payday Loan’s reputation for customer service was highlighted by a recent survey which returned a number of compliments for the team and the benefits of online payday loans. More customer surveys are planned to monitor the success of the new team.

As the My Payday Loan team continues to grow and customers remain happy with the service, it emphasizes that a no fax payday loan is still the best alternative to risking high and confusing bank charges when a little extra cash comes in handy

It's no secret that New Mexico Governor Bill Richardson isn't a big fan of payday loans. Following months of industry criticism, Richardson and Attorney General Patricia Madrid announced regulations yesterday, all meant to curtail predatory payday advance lending in the state.

The regulations, which target payday loan lenders almost entirely, would go into effect July 16 - after a public comment period in June.

Among the main features of the regulations are fee cap of $15.50 per $100 borrowed and limits on the total amount borrowed on a payday loan online to 25 percent of the borrower's gross income.

We have to do this," Richardson said during a news conference in Albuquerque today. "We have to stop abusive practices against consumers."

The regulations would:

• Set a flat fee for new payday loans and renewals at $15.50 per $100.
• Give consumers the sole discretion of renewing a cash loan two times at a maximum fee of $15.50 per $100.
• Cap the amount of borrowed money at 25 percent of the consumer's gross income.
• Give consumers the chance to enter into a longer-term payment plan - up to 130 days - with no additional fees after a second payday loan renewal.

"In the past," Madrid said, "people had only two weeks to pay. We are going to lengthen the time. They all want to pay. Now, we are going to make that possible."

Madrid has attempted to get legislation regulating payday loans passed since she became attorney general in 1999, to no avail.These regulations, she said, do not require legislative approval.

Aliens. Chihuahuas. Office ladies who turn into leotard-sheathed dancers coming to the rescue. All of these unusual entities have been the focus of payday loan commercials in Japan - and the ad campaigns have been working!

 
According to the Japan Consumer Finance Association, this market has continued to expand - the combined amount of outstanding payday loans at consumer lenders exceeded 11.7 trillion yen in March 2004, 2.5 times the amount reported 10 years before.

"There has always been a strong demand for such loans" that require no collateral or guarantor," said Tomoaki Sakano, a professor at Waseda University's faculty of commerce.

Back in the 1960s, the faxless cash advance loan business was an untapped niche market in Japan, where banks were mainly focused on companies and unsecured payday loans were too risky to match the interest rates they offered. Despite occasionally drawing heat for aggressive collection tactics and the growing number of people ladened with multiple debts, this is where consumer finance companies have come to play a key role, according to Sakano.

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The city council in Racine, Wisconsin, voted unanimously to create a 90-day moratorium on new payday loan businesses in the city, reports the Journal Times.

The temporary ban will be in place for the next three months to give the city time to draft new ordinances that establish where Wisconsin payday loan firms can operate. Aron Wisneski and Greg Helding have taken the lead for the council on the issue.

Wisneski grew concerned after learning that payday advance loan businesses charge its customers as much as 800 percent interest on a $300 loan. Citing West Racine as an example, Wisneski added he was concerned the businesses were descending on the city too quickly.

While the city can't ban the businesses, which are legitimate, it can use zoning laws to restrict where they operate. Milwaukee, Madison and many other cities across the country have created guidelines for where payday loans and similar businesses can operate.

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