Bill Nelson, U.S. Senator from Florida: Media Release: Opposition brewing to cap on military payday loans

WASHINGTON, D.C. - A House-Senate conference committee is working this week to complete negotiations on next year’s defense spending plan, including a Pentagon-sought provision that would crack down on unscrupulous lenders who rip off military borrowers.

But, according to newly published reports and a warning from one of the nation’s leading military watchdog groups, the protection against charging service members loanshark-like interest rates may be stripped from the bill during closed-door meetings of the conferees.

“Some legislators . . . are trying to water down a provision cracking down on unscrupulous loan sharks who put military families into financial jeopardy by issuing payday loans at annual interest rates of 390 percent to 1,000 percent,” says a newsletter issued Friday by the Military Officers Association of America. Also, a newspaper account over the weekend confirmed at least one key House member is seeking to quash the proposal.

The nonpartisan military group issued a warning to its 370,000 members from all service branches, urging active duty, retired, Reserve and former officers and their families to lobby Congress to save the payday loan amendment by U.S. Senators Jim Talent and Bill Nelson.

Talent, a Republican from Missouri, and Nelson, a Democrat from Florida, crafted the measure that changes federal law to better protect service members, including a proposed 36 percent cap on interest rates for loans to service members and their immediate families.

Their proposal came months before a Pentagon report that found financial naiveté and regular paychecks made young enlisted troops perfect targets for a growing industry of lenders who bet that high-interest, short-term loans cannot easily be repaid.

The two lawmakers managed to get their proposal approved as an amendment to the Senate version of the 2007 defense authorization bill, which is pending this week before the conference committee charged with working out differences between the House and Senate versions.

But U.S. Rep. Steve Buyer, a Republican from Indiana, and the chairman of the House Veterans' Affairs Committee, reportedly is urging House negotiators to drop the rate cap from the defense bill because he does not think the proposal belongs there. And, according to Saturday’s editions of the Lexington Herald-Leader, Rep. Geoff Davis, a Republican from Kentucky, is now fighting the proposal to cap high interest rates for short-term payday loans to military service members.

The split among Republicans was met by the military officers association with a message to Congress last week saying the failure to enact a 36 percent rate cap would favor unscrupulous predatory lenders over the financial interests of service members.

“There's a clear-cut bottom line here: Congress must decide between supporting the troops or supporting the payday lenders who are leeching off them and hurting military families and military readiness. There's no halfway as far as we're concerned,” the group said.

Senator Nelson, a member of the Senate Armed Services Committee, agrees. On Monday, he wrote to the head of the House Armed Services Committee who co-chairs the conference panel, and asked that the payday loan cap stay in the final version of the broader defense bill.

“I request that you resist ongoing efforts to weaken the provision,” Nelson said in his letter. “Although at least one conferee is interested in striking a “compromise” on this amendment, I have grave suspicions that any such compromise is meant to gut the amendment, at the request of the payday loan industry.”

A decision by the conferees is expected this week, as early as Tuesday.

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