Talent renews push for cap on payday loan interest rates

September 7, 2006 - Washington, D.C.

Sen. Jim Talent on Thursday renewed his push for legislation to stop payday loan companies from targeting military personnel.

The Missouri Republican wants Congress to approve a 36 percent annual percentage rate cap on payday loans to service members and their spouses. He said payday lenders, which offer quick cash advances at high interest rates, take advantage of soldiers through deceptive marketing.

Talent's measure imposing the interest rate cap passed the Senate earlier this year as part of a massive defense bill, but it was not included in a House-passed version. Talent collected signatures this week from 31 senators asking a conference committee to leave the rate cap in a final version of the bill.

"While it would be great if every 18- 19- and 20-year-old was sophisticated enough in financial matters to avoid these scams, the reality is there are some things only experience can teach you," Talent said at a news conference. "We ought to protect them until they have the experience in life to protect themselves."

If payday loans are not paid off quickly, lending fees can add up quickly and borrowers can end up with huge debts, sometimes paying an annual percentage rate of 800 percent or more.

A Pentagon report earlier this year concluded that many payday lenders are clustered around military bases. In Missouri, the tiny town of St. Robert near Fort Leonard Wood, has eight payday lenders, though the town has only 5,200 residents.

The Pentagon report found the average service member who borrows $350 for less than six months ends up paying back more than $1,100 as fees are rolled over repeatedly.

Talent said the problem is affecting military readiness. In the past five years, 5,400 sailors and Marines have lost their security clearances because of severe financial problems, often caused by spiraling debt from payday loans.

Rep. Sam Graves, R-Mo., who introduced a similar measure in the House, said payday lending issues are becoming more prevalent with long troop deployments, as service members and their families face increasing financial hardships.

"I recognize that lending is obviously a risky business, but 800 percent is outrageous," Graves said.

The measure would not prohibit states from imposing rate caps lower than 36 percent.

Democrat Claire McCaskill, running to unseat Talent in this year's Senate race, has criticized Talent's bill for not going far enough.

"The 36 percent APR cap in this bill isn't low enough," said McCaskill spokeswoman Adrianne Marsh. "McCaskill believes Sen. Talent's bill doesnt protect our military families because it doesn't outlaw their abusive lending practices."

Steven Schlein, spokesman for Community Financial Services Association, which includes two-thirds of payday lending companies, called the 36 percent cap unfair and said it wouldn't address the problem of how military members handle debt.

"On a $100 loan, we charge $15 for two weeks," Schlein said. "If the rate cap were 36 percent, that would be $1.38 for that loan. We can't do business charging that. The paperwork alone costs more."

Schlein said he thought some payday lenders would stop loans to service members altogether. But soldiers might secretly send their wives or girlfriends to get loans, he said, or be pushed to seek high-cost loans from unregulated Internet lenders.

But Vice Adm. Norb Ryan, president of the Military Officers Association of America, said he's seen too many instances where payday loan debt hurts troop morale, places undue stress on soldiers and destroys military careers.

"It's got to stop," Ryan said. "It's shameful."

Most consumer groups support the legislation, including Consumers Union and the Consumer Federation of America.

News Source

Centre Daily Times, Sam Hananel, AP Writer

Recent Related Stories - Military

• Industry preys on Alabamians [March 19, 2007]
• Payday Mayday: The law should treat adults as adults [December 13, 2006]
• Lawmakers urge payday loan alternatives [December 8, 2006]
• 'Dan Rather Reports' criticizes payday loan industry [November 23, 2006]

Related Stories - Washington D.C.

• Lawmakers urge payday loan alternatives [December 8, 2006]
• Extend loan interest cap to all, lawmaker says [December 7, 2006]
• President caps payday loan rates to military personnel at 36 percent [October 18, 2006]
• Lawmakers agree on 36 percent payday loan cap [September 21, 2006]
• Breaking the cycle of the payday loan 'trap' [September 19, 2006]
• Senators consider payday loan limits, criticize industry [September 16, 2006]
• Testimony: Defense Department predatory lending report seriously flawed [September 14, 2006]
• Payday lender plan could nix profit from military [September 13, 2006]
• On payday, many GIs pay back [September 10, 2006]
• Talent renews push for cap on payday loan interest rates [September 7, 2006]
• Pentagon sees risk in troops' loan debt [August 31, 2006]
• Pentagon backs effort to cap interest rate on 'payday loans' [August 15, 2006]
• 'Payday' loans become target in Washington [August 3, 2006]
• CFA launches payday loan information website [May 4, 2006]
• US troops screwed by loan shark companies [February 1, 2006]

Return

See: Recent News | Archived News | RSS Newsfeeds | News by State
Go to PLIWatch.org home.