A Congressional committee did the right thing today by approving a 36-percent cap on payday loans to military personnel that will protect them from these predatory lenders.
It was a victory for the Pentagon; the consumer, civil rights and veterans groups who stood up with it; and Sen. Jim Talent (R-MO) and Sen. Bill Nelson (D-FLA), who introduced the amendment. But most of all, it was a victory for our soldiers, sailors and aviators, many of whom had faced the awful choice of paying grocery bills and rent or the usurious fees on their payday loans every two weeks.
"At a time when America's service men and women are making sacrifices for all of us, the least the rest of us can do is try to put them out of financial harm's way," said Michael D. Calhoun, president of the Center for Responsible Lending, a nonprofit that fights predatory lenders.
Payday lenders typically require borrowers to endorse a postdated check and then trap them into rolling the loan over repeatedly at annual percentage rates that can top 400 percent. The average payday borrower pays back $827 on a $339 loan.
The Talent-Nelson amendment to the Defense Authorization bill got a boost in August when the Defense Department sent to Congress a study that showed payday lenders were hurting the nation's military preparedness. The report endorsed a 36-percent cap on these loans, the same cap many states impose in their usury laws in order to ban loan-sharking.
The Department of Defense found that soldiers, sailors and aviators are as many as four times more likely to be victims of payday lenders. These lenders cluster around military bases, the report found, preying on young, financially unsophisticated soldiers.
"So let us take a little time today and celebrate this victory against the predatory lenders. And then let's get back to work and extend these protections to all of America's working families."
Both houses of Congress are expected to take up the bill later today.
To read Mr. Calhoun's entire statement or to learn more about payday lending, go to www.responsiblelending.org.