A Defense Department study sent to Congress yesterday shows that Congress must stop predatory lenders from preying on our soldiers, sailors and aviators, said President Michael Calhoun of the nonprofit Center for Responsible Lending.

The Pentagon report says payday lenders should charge no more than 36 percent annual percentage rates on their loans to service members, the same cap many states impose in their usury laws in order to ban loansharking. The report said these lenders damage morale and hurt our military preparedness.

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.

"I applaud the Defense Department's report," Mr. Calhoun said. "Military families need protection from these predators. We must protect the people who protect us."

Congress asked the Department of Defense to investigate these predatory lenders and how they gouge our service people and hurt the country's preparedness for war.

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.

"Predatory lending undermines military readiness, harms the morale of troops and their families, and adds to the cost of fielding an all-volunteer fighting force," the report said. "The Department of Defense cannot prevent predatory lending without assistance from Congress, the state legislatures, and federal and state enforcement agencies."

Sen. Jim Talent (R-MO) and Sen. Bill Nelson (D-FL) amended a defense budget bill to impose the 36-percent cap, and the bill has passed the Senate. It must now be approved by a House-Senate conference committee before it can become law.

CRL supports additional protections recommended by the Department of Defense including a ban on loans secured by personal checks or car titles.

The DoD report, a CRL summary of the report, and a statement by CRL President Michael Calhoun are available at www.responsiblelending.org.

For more information, call Michael Flagg at (202) 349-1862 or email mike.flagg@responsiblelending.org or Sharon Reuss at (919) 313-8527 or sharon.reuss@responsiblelending.org.

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