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Editorial: Time to say 'no' to payday loan sharks

One can only imagine how the Golden State would shine if it had a plurality of state lawmakers with the moral character of Holly Petraeus.

Petraeus, wife of CIA Director and retired Army Gen. David Petraeus, has become an impassioned advocate for returning military veterans. In that capacity, she has taken on for-profit colleges and payday lending outfits that are trying to shake dollars loose from men and women who have served their country.

Yet instead of the likes of Petraeus, we have the Calderon brothers. Assembly Majority Leader Charles Calderon, D-Whittier, and Sen. Ron Calderon, D-Montebello, are the Assembly and Senate's largest recipients of campaign cash from the payday loan industry. And both have played key roles in making California the epicenter for this predatory form of lending, as the San Jose Mercury News reminded us Sunday in an investigative report.

According to the Mercury News, the number of annual payday loans in California has increased from 10 million in 2006 to 12 million last year, even as more and more states restrict the practice. Some 17 states and the U.S. military have now effectively banned payday loans, which take advantage of low-income people seeking a cash advance on their paychecks.

At most payday shops, a borrower can get a loan in exchange for a postdated check, which he or she agrees to pay off in two weeks or a month. In California, lenders usually charge a 15 percent fee, or $45 on a maximum $300 loan.

Yet all too often, borrowers must take out another loan to pay off the previous one, pulling them into a spiral of debt. Over the course of a year, a borrower taking out multiple payday loans can end up paying an annual interest rate of 460 percent.

In 2006, the Department of Defense described payday lenders as "predatory" and a threat to troop morale and national security. Congress passed a law capping interest rates at 36 percent on payday loans made to U.S. military service members. That drove the industry to civilian clients and places such as California, where Charles Calderon a decade earlier had passed a bill that legalized payday lending, capping each loan at $300.

The Payday Loans Process Done Via Store | soldiersangelsforum.com

If a borrower opts to go to a store for payday loans then a postdate check will have to be involved. After securing a loan from the store, the borrower has to write a postdated check containing the amount plus fees. The postdated check is an assurance to the lender that the borrower will be able to pay the loan. If the borrower does not come back to the store to pay the loan on the maturity date then the lender will redeem the check. If the account is short on funds to pay then the borrower will have to pay the bounced check fee from the bank. The lender can also charge the borrower more for providing him with a bounced check in addition to the amount of the loan. This is a better process than the online process because the lender is going to be confident that he will get paid.

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