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Lawmakers agree on 36 percent payday loan cap
September 21, 2006 - Washington, D.C.
Congressional negotiators have decided that protecting military paychecks is more important than jurisdictional squabbles, and have agreed to include a 36 percent cap on loan interest rates and fees in the 2007 defense authorization bill. The loan limit, which would apply to money borrowed by active-duty service members and their spouses, is aimed at so-called payday operations that provide high-interest, short-term loans, according to sources involved in working on the compromise bill. Work on the authorization bill continues as lawmakers try to work out some final differences, with 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. Chu said other attempts to protect military members have proven ineffective because of 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 payday loan industry has fought hard against the cap, arguing that charging high rates for unsecured loans is not unreasonable and also arguing 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 loan 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.
News Source
Marine Corps Times, Rick Maze, Staff Writer
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