More than 70 consumer and veterans groups are calling on Congress to enact an amendment by Sen. Jim Talent (R-Missouri) and Sen. Bill Nelson (D-Florida) to protect military families from payday lenders, who trap borrowers in a vicious cycle of debt at interest rates of more than 400 percent a year.
This predatory business doesn't just ravage service members and their families. It means our military is less prepared. And it potentially dangerously distracts soldiers, sailors and aviators from their mission.
Senators Talent and Nelson amended the Defense Authorization Bill (Senate Bill 2766) to cap interest rates on loans to service members at 36 percent - the same cap imposed by many states to thwart usury and loan sharks.
A House-Senate conference committee must now approve the amendment for it to become law. Consumer and veterans groups are urging committee members to do what is clearly the right thing and vote for the amendment.
"We need your help in protecting military families from companies that target them with exorbitantly priced loans," the groups said in letters to Congress released today. Payday lenders cluster around military bases and target members of the military, according to a study by professors at the University of Florida and California State Northridge. The payday industry's own numbers show service members are twice as likely to be victims of payday loans. And the Defense Department itself says predatory payday lenders threaten the wellbeing of military families. Release of a Defense Department study on the effect on troops of predatory lending, including the payday business, is expected soon.
Federal law already lowers interest rates on loans service members borrowed before they entered the military. The amendment caps rates on loans they borrow after enlisting or being mobilized.
The amendment also covers car-title lending. These lenders make borrowers pledge the title to their car as collateral and charge up to 300 percent interest.
The payday business works this way: A lender requires a borrower to sign a check postdated by two weeks. Few borrowers can repay the loan after two weeks, and they roll over the loan by paying another two weeks' fees, typically $15 per $100.
Victims often wind up paying more in fees than the amount they borrowed, on average $800 to borrow $325, wreaking havoc on families' finances and causing hardship and misery to the people charged with defending our country.
To read the letters:
For more information on payday lending:
Payday Lending - Overview
Contact: Michael Flagg at the Center for Responsible Lending at 202 349-1862, firstname.lastname@example.orgJean Ann Fox at the Consumer Federation of America at 757 867-7523, email@example.com