WASHINGTON — In what has shaped up to be a classic Washington legislative battle, House and Senate conferees working on this year's defense authorization bill are wrestling as of press time over whether to cap the interest rates payday lenders can charge military members at 36%.
The effort has been on the back burner for several years, but the combination of an election year and a push from the Defense Department to put the cap into place has moved the restriction to the front burner and thrown the payday lending industry into a legislative goal-line stand.
According to consumer and military lobbyists who are working the issue hard, the fight among the conferees has developed between Senators who have generally cast the issue as one of supporting troops in wartime and some House members who say they object to the amendment because it appears to single out payday lenders.
But amendment supporters and press reports say the members opposing the amendment are responding to the payday lenders who have given them large sums toward their re-election campaigns.
CUNA has taken a position in support of the amendment, but not in an unqualified way. In a Sept, 14 letter to Senators Richard Shelby (R-Ala.) and Paul Sarbanes (D-Md.), the chairman and ranking member of the Senate Banking Committee, CUNA urged the Senators to take up another bill as well, the Military Personnel Financial Services Protection Act, which would include not only an interest cap, but other protections as well.
These include using symbols or representations that indicate the military endorses a financial product or service as well as forcing members of the military to waive their rights under the Servicemembers Civil Relief Act which protects members from harassment and abuse from lenders.
Dean Sagar explained CUNA backs the 36% cap, but believes it does not go far enough and leaves the door open for continued abuse of service members through other products and services. Amendment supporters say that they recognize the amendment's limitations, but contend that it remains a worthy first step and an important symbol of the effort to reign in payday lenders.
Some of them have also charged that the position CUNA tentatively backs would also effectively water down the cap's impact.
For their part, the payday lenders would seem to agree, as they appear to have pulled out a lot of their resources in an effort to keep the cap from becoming law.
Since the Senate version of the defense appropriations bill contains the cap, but the House version does not, the battle has focused on cap opponents trying to strip or water down the cap and supporters trying to keep it in the final bill and intact. Opponent champions have included Representative Geoff Davis (R-Ky.) and Steve Buyer (R-Ind.), though Buyer has been reported to have been willing to compromise on the question.
Davis' office did not return calls for comment, but the Associated Press has reported that CNG Financial, parent company of the payday lending firm Check 'n Go is in Davis' district and Davis' office has said Davis has consulted with CNG about the amendment. The Center for Responsive Politics has reported that CNG executives have given almost $11,500 to Davis for his campaign funds this election cycle.
Against the pull of campaign contributions, amendment supporters have mustered military groups, which have strongly supported the amendment as a matter of patriotism.
One, the Military Officers Association of America, has notified its members and called on them to send e-mail and call conferees to urge them to keep the cap in the bill.
MOAA charged that the payday lending issue is directly related to military readiness because many service members lose their security clearances each year as payday lenders entrap them into ever-deepening debt. The association charged as well that Davis' proposal "would drop the 36% rate cap and allow loopholes that payday lenders could drive a truck through."
MOAA added that the proposal would broaden protections on certain insurance and investment products; it wouldn't do much at all to protect the troops from predatory lenders.
"MOAA strongly agrees with the Pentagon report, and doesn't want to see any more back-room deals on 'technicalities,'" the MOAA told its 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."
As of press time, none of the lobbyists who track the issue feel confident enough about the outcome to speculate on where things are headed. –dmorrison@cutimes.com
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