Payday Advance Providers Gather Against Military Payday Loan Bill
By J.J. CameronPayday Loan Writer
While the Pentagon is joined by consumer groups in its battle to limit military payday loans, providers of such cash advances are banding together.
Those that give out payday loans online for a living are mounting their own campaign against the interest rate cap, attached to the Senate’s defense authorization measure by Jim Talent (R-Mo.) and Bill Nelson (D-Fla.).
If Congress limits military payday loans to a 36 percent annual rate, the industry says it would not be able to cover expenses, adding that a market that can prove helpful to cash-strapped service members would dry up.
Focus on payday loans: The Center for Responsible Lending, the lobbying arm of community development lender Self-Help, has shifted its focus for this fall away from a legislative crackdown on predatory mortgage lending, which is not expected to move until next year, and onto the Talent-Nelson no faxing payday loan amendment.
Center president Michael Calhoun touted a Department of Defense (DoD) report last month that found payday lenders clustering around military bases to target service members and endorsed a 36 percent rate cap. He said the DoD has taken the lead in lobbying lawmakers for payday advance caps, setting up frequent Hill visits and allowing the Center to provide backup.
“It’s the right policy and right politics for folks to be supporting troops and supporting DoD,” he said. “This is not us pushing [the DoD]. We quite frankly have been surprised at how strong they have been.”
Payday loan companies fight back: The payday loan industry’s trade group, the Community Financial Services Association (CFSA), maintains a high-powered lobbying team that includes Van Scoyoc Associates, Nueva Vista Group and Butera & Andrews but has no registered in-house lobbyists.
Dezenhall Resources, a crisis-communications firm known for its work for ExxonMobil, is helping the CFSA contain the fallout from the DoD report, which detailed industry tactics aimed at ensnaring often-uninformed soldiers in repayment plans they cannot meet.
“What the military isn’t getting is: they are not going to solve the problem. They are going to get soldiers higher loans than they want over a longer term than they want,” said CFSA spokesman Steven Schlein, of Dezenhall. “We’re talking about $100, $200 loans. Banks don’t make them, credit unions don’t make them.”
Schlein contended that Internet-based companies - that specialized in faxless payday loans - operating out of Costa Rica could continue loaning to service members even if the amendment passes. The DoD report, he added, “was not fresh research. They reiterated very closely stuff that [the Center for Responsible Lending] and other critics had put out there.”
Meanwhile, the American Bankers Association (ABA) has raised separate questions about the wording of the Talent-Nelson amendment, although it has not officially opposed the provision.
“They are well-intended, in that they’re trying not to have payday lenders take advantage of” soldiers, said ABA director of housing James Ballentine, but “the language does not define whether they’re going after payday lenders or lenders in general.”
The effort for federal limits on no credit check payday loan interest suffered a minor setback last week in California, where the state legislature voted down a rate-cap bill after the payday industry mobilized to lobby against it.
“When we get to make our case, people understand that the 36 percent rate cap is a bad idea,” Schlein said. “If [the loans] could be done cheaper, someone would be doing it.”
Support for the amendment, however, crosses partisan lines and has grown in the wake of the DoD report. Senate Armed Services Committee Chairman John Warner (R-Va.) congratulated Talent during a floor speech before the Senate passed its defense bill, and 11 House Armed Services Committee Democrats wrote to Chairman Duncan Hunter (R-Calif.) last week asking that the rate cap be added to the conference report.
“Predatory lending not only hurts service members and their dependents, it is having an impact on our nation’s security,” the House Democrats wrote.
Spencer Bachus (R-Ala.), also a key participant in House predatory lending talks, said through a spokeswoman that he generally opposes committee action on issues outside of jurisdiction, but makes an exception for the amendment because “an argument can be made that these loans affect morale in Iraq and Afghanistan.”
If that's the case, it seems unlikely that some sort of regulation on these bad credit payday loans won't be passed.
