Lawmakers Agree on 36 Percent Payday Loan Cap for Military
By J.J. CameronPayday Loan Writer
Congressional negotiators have chosen to protect military paychecks instead of argue over jurisdiction: they've agreed to include a 36 percent cap on cash loan interest rates and fees in the 2007 defense authorization bill.
The limit, which would apply to money borrowed by active-duty service members and their spouses, is aimed at supposedly cheap payday loan operations that provide high-interest, short-term paycheck advances, according to sources involved in working on the compromise bill.
Lawmakers are continuing to try to work out a few final differences, but Republican congressional leaders hoping to get a final bill to the White House by late next week. In testimony last week, David S.C. Chu, undersecretary of defense for personnel, called on Congress to approve the 36 percent interest limit.
He said past attempts to protect military members have proven ineffective due to differences in how states regulate loans and because some lenders were avoiding state laws by only lending money to nonresidents of the state where the money was given; or by using the Internet.
The cash advance industry has fought hard against the cap, arguing that charging high rates for unsecured loans is not unreasonable and stating that the industry has not - as the Defense Department claims - targeted military members for loans.
The Senate included the interest cap in its version of the defense bill passed earlier this year, but getting the House to adopt the provision has proven difficult because two committees - veterans’ affairs and financial services - claimed jurisdiction over payday cash advance issues. Negotiators got around those objections by putting the interest cap in Title 10 of the U.S. Code, a section covering military benefits, rather than in banking or veterans’ law.
