Pentagon Report on Military Payday Loans on Deck
By J.J. CameronPayday Loan Writer
Here comes the Pentagon.
As the debate over military payday loans rages on, the goverment plans on getting prominently involved. The Pentagon is expected to ask Congress to cap the interest rate payday advance lenders can charge troops, according to defense and congressional sources.
It's a move that could drive the payday loan industry out of military lending.
The Defense Department's report will recommend a series of steps to protect troops from dangerous cash loan lending practices that can push them deep into debt and, officials argue, hurt their ability to focus on military missions. Pretty major stuff.
The Pentagon has declined to discuss conclusions of the report, which was due July 7. However, Col. Michael Pachuta told a National Association of Federal Credit Unions conference last week that the report would likely recommend a series of steps to Congress, including the interest rate cap.
Congressional and industry sources familiar with the report also say it may support proposals to cap the APR on no fax payday loans to servicemen at 36 percent.
Ramification of any payday loan legislation: This would force the payday loan industry, whose short-term loans can carry interest rates of more than 300 percent, out of military lending. It would not, however, affect other military lenders that offer loans with lower rates, but whose practices would be prohibited under legislation aimed at stamping out predatory lending to troops.
"This approach does not address the problem, but rather it appears to simply exempt certain lenders that lend solely to the military," Sen. Tim Johnson, a South Dakota Democrat, said.
Supporters of the cap say some lenders target troops around military bases and offer online cash loans that lead to mountains of debt, costing millions of dollars in interest payments, that servicemen often cannot get out of. Military readiness is negatively affected.
"If their family is having financial difficulties at home, it affects the servicemen's ability to do their warfighting role," said Fred Becker, president of the credit union group, whose members include military credit unions.
Some other groups, conversely, say the payday loan problem is not as big as the military portrays it. A recent study by the Consumer Credit Research Foundation, whose research has focused on the payday industry, said military personnel who use payday loans repay them far more quickly than civilian borrowers.
