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Payday loaning draws outrage at panel hearing

May 24, 2006 - Sacramento, California

Pleas to crack down on "legalized loan sharks" who prey on young military personnel drew a sympathetic response from the chairwoman of a joint legislative committee yesterday, but little sign of action.

State Sen. Liz Figueroa, D-Sunol, had strong reactions as her committee was told of high-interest lending practices that are plunging young service men and women deep into debt.

The chairwoman of the Joint Committee on Boards, Commissions and Consumer Protection said the practice "sickens me" and called the situation "horrific."

But at the end of the hearing, Figueroa only mentioned closing a loophole that excludes the military from protection by the faulty-auto "lemon law" if their vehicle was purchased out of state.

"The one I am going to immediately work on is the issue of the lemon law," Figueroa said.

She was the lone legislator in the room until state Sen. Ed Vincent, D-Inglewood, arrived midway through the two-and-a-half-hour hearing. The three Assembly members of the committee did not attend the hearing.

Two uniformed men from San Diego area bases opened the hearing with passionate pleas to crack down on the growing number of loan offices lining the roads near military installations.

But there was no sign at the hearing that California legislators are planning to tighten regulation of loans secured by future paychecks or, like North Carolina, ban the so-called payday loans.

Capt. Mark Patton, a Point Loma Naval Base commander, said an "explosive increase" in the number of loan shops has become a "direct threat to military readiness."

Patton said personnel are being denied security clearances because of financial problems. He cited the example of a highly trained sailor unable to deploy to Iraq, whose skills are unused now as he guards a gate.

The Center for Responsible Lending identified nine predatory lending practices, Patton said, and current California law permits all of them.

"We simply do not need the so-called services of these predators outside our gates that are little more than legalized loan sharks," Patton said.

Officials from lending companies defended their businesses, saying the provide a desirable service.

Military and government officials expressed a need to educate young military personnel, who often are not sophisticated in finances.

Jennifer Contreras of the Navy-Marine Corps Relief Society at Lemoore said military personnel may be attracted to the speed of obtaining a payday loan "in many cases less than 10 minutes."

Getting aid from the Relief Society, Contreras said, requires a step-by-step layout of income and needs that takes longer than "some folks in our I-need-it-now society" are willing to wait.

News Source

Union-Tribune, Ed Mendel, Staff Writer

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