A battle is shaping up in Congress that will have a profound effect on military personnel, and the biggest, best-funded guns are aimed directly at our fighting troops. The military is asking Congress to outlaw a practice that it says undermines military readiness, harms the morale of troops and their families, and add to the cost of fielding an all-volunteer fighting force.
The practice? Predatory lending. Specifically payday lenders that charge 400-800% interest for loans directly targeted at military families.
The plan? A cap on interest rates for military families.Â
What are the big guns on the other side? The very profitable payday lending companies, backed up by their powerful lobbying forces. They may have some allies in the form of the American Bankers Association; their group is worried that proposed legislation will cover high-priced credit cards and other consumer loans.
Will the military, led by Senators Jim Talent (R-Mo) and Bill Nelson (D-Fl), prevail? Or will the heavy lobbying assault from the industry win out?
We’ve talked about the Talent-Nelson amendment to the Defense Authorization bill, a proposal that would cap interest rates at 36% for loans to military families. Some people think 36% looks stunningly high, especially those old enough to remember state usury laws that were often capped at 18%. But in a world in which payday lenders routinely collect 400-800% interest, 36% looks like meaningful reform. Indeed, it is so meaningful that the industry is waging a full assault against the bill.
This should be a no-brainer for politicians on both sides of the aisle. In early August, the Department of Defense issued a powerful report calling on Congress to protect military families, citing the need to maintain troop readiness. And a nationwide poll shows that 75% of people who donât use payday lenders and 74% of those who do support usury caps on lending. The political issue was made in Heaven for those who want to support the troops without having to wade into the thorny issues surrounding Iraq and Afghanistan. This one is easy except for the influence of the lobbyists.
And the lobbyists have plenty of influence. California was pushing an effort to put some caps on payday lending was sure to pass until the lobbyists rolled in. Last week the legislature crumbled, and the bill was defeated.
But the friends of the military are pushing back. As I wrote this, my inbox pinged with a note from the Center for Responsible Lending asking me to send letters to DC to support the Talent-Nelson Amendment.
Payday lenders undoubtedly hope this issue will fly below the radar screen, making it easier for politicians to vote their way. But with consumer groups like the CRL and respected agencies like the Department of Defense working together, and with powerful Congressional leaders on both sides of the aisle supporting the bill, maybe our military will stand a fighting chance.
