Our view: City Council should enlist in fight against predatory payday loan businesses

The men and women serving our country in uniform are many things - brave, dutiful, tenacious, fierce - but many, especially the younger recruits, lack financial savvy. We need our troops focused on training here in San Diego County, and on battle overseas - and not on personal and household debt.

Thus we support the proposed ordinance to increase regulation on payday loan centers coming before the Oceanside City Council tonight. While the Marines of Camp Pendleton deserve access to the financial options available to us all, the clusters of nearby businesses tempting them with small loans with big interest rates and bigger penalties can and should to be policed more closely. After all, it isn't just service members' peace of mind at stake, but their ability to wage war and protect peace, as well.

Meager paychecks, mixed with youth and the live-for-today attitude often adopted by men and women rotating in and out of war, make our troops attractive targets to all kinds of easy-money scams. Among them are the payday loan centers that advance customers small amounts of money at exorbitant fees and rapidly escalating interest rates.

Military personnel aren't the only Americans battling bad credit and compounding debt, of course, but their struggles pose a unique threat to national security.

For instance, under Navy rules, sailors whose debts are more than 30 percent of their income cannot be sent overseas. As of last year, the number of sailors and Marines since 2000 who could not deploy because of financial problems had soared 1,600 percent. In 2005 alone, 2,000 sailors had their security clearances denied or revoked because of financial difficulties, and the trend is the same for other armed services.

Payday loans are a big part of the problem. The Department of Defense cites studies showing that far more payday loan businesses concentrate in communities near military bases than comparable cities without a base nearby. Oceanside has at least 22 licensed payday lenders, about 17 more than a city of a similar size would likely have, according to the Pentagon.

And while representatives of the payday loan industry say that only a small percentage - 4 percent or less - of their customers are active-duty military, that figure doesn't account for their concentration outside the base gates nor accurately reflect the extent to which military families rely upon their services.

Using the industry's own data, the Pentagon estimated that 225,000 service members, or 17 percent of the military, use payday loans.

That's what prompted Maj. Gen. Michael R. Lehnert, commanding general of Marine Corps Installations West, to implore the Oceanside council to help defend against predatory payday lenders nine months ago.

The ordinance Oceanside's council will consider tonight would change the city's zoning laws so that payday loan/paycheck advance establishments would be treated like adult book stores or liquor stores, not banks. The city would gain the right to limit where payday loan stores could be located.

Of course, regulating the number and location of payday loan businesses will not solve the problem. From credit cards to auto loans, rent-to-own to subprime mortgages, there's no shortage of opportunities for young, financially naive sailors and Marines to get in over their heads.

Oceanside's action follows efforts at the state and federal levels.

California limits cash advance loans to $300 and fees to a maximum of 15 percent, but the annualized interest rate on two-week loans can and often does reach upward of 400 percent. Attempts to strengthen regulations have been consistently thwarted. The state Department of Corporations does offer an education campaign called Troops Against Predatory Scams .

More significant is a federal law set to take effect Oct. 1, which will cap the annual interest that payday loan operators can charge members of the military at 36 percent. The Wall Street Journal says this restriction will limit what lenders can charge to no more than $1.38 in interest and fees for every two-week, $100 loan, a rate at which industry experts say they can't make a profit. That will almost certainly do more to halt the growth of payday loan centers in military towns like Oceanside than anything attempted by the City Council.

But the problem is not going to disappear overnight. As a military town that has greatly benefited from its proximity to Camp Pendleton, Oceanside has a duty to help the Marines defend against predatory lenders. This ordinance may not do much, but it may help protect our military on the home front.