thedrifter
09-16-06, 08:28 AM
Posted on Sat, Sep. 16, 2006
Davis opposes cap on military payday loans
By John Cheves
HERALD-LEADER STAFF WRITER
WASHINGTON - Rep. Geoff Davis, R-Ky., is fighting a proposal to cap high interest rates for short-term payday loans to military service members at 36 percent, drawing protests from consumer watchdogs and military groups.
The Pentagon has accused payday lenders of surrounding its military posts and exploiting troops, leading to bankruptcies, divorces and ruined careers.
"It would be interesting to know why Congressman Davis is working against the protection of servicemen that no less than the Department of Defense wants from Congress," said Jean Ann Fox, consumer-protection director for the Consumer Federation of America.
An aide to Davis yesterday said the congressman has consulted CNG Financial of Mason, Ohio, one of his top campaign donors and owner of national payday lender Check 'n Go.
CNG executives have given Davis $11,450 for his race this year against Democrat Ken Lucas, according to an analysis by the Center for Responsive Politics.
But Davis -- a freshman congressman representing Northern Kentucky and himself an Army veteran -- wants to strengthen protections for service members, not weaken them, said chief of staff Justin Brasell.
Davis objects to the amendment written by Sens. Jim Talent, R-Mo., and Bill Nelson, D-Fla., and passed by the Senate in June because it would impose a 36-percent cap only on payday lenders. It would not cover insurance companies, investment brokers and others that target service members with ruinous hidden fees, Brasell said.
CNG Financial did not return a call seeking comment yesterday. But the payday lending industry, represented in Washington by the Community Financial Services Association, said it supports Davis in his fight to defeat the Talent-Nelson amendment.
"We oppose the 36-percent rate cap because it would essentially end our business with the military," said CFSA spokesman Steve Schlein. "Congressman Davis' approach is much more thoughtful."
In place of the proposed amendment, Davis prefers to insert some or all of a House bill he has written, which would not set a specific cap for interest rates. Instead, it would establish broad guidelines intended to curb abusive financial practices toward service members, Brasell said.
"That's our main concern, that the coverage is comprehensive and it's not just targeted at part of the businesses who lend to the military," Brasell said.
Payday loans tend to be small -- about $350 on average -- and are due on the next payday, often in two weeks. They cost from 390 to 780 percent at an annual interest rate, according to a critical report on the industry issued last month by the Defense Department.
Payday lenders cluster around military bases, drawn to young, financially inexperienced soldiers, sailors and Marines who have guaranteed wages, according to the report. For example, the ZIP code for the south gate of Camp Pendleton, Calif., has 22 payday lenders, or 17 more than would be expected by the local population.
Davis' legislation is opposed by a coalition of military, veterans, consumer-protection and legal groups, who have argued in letters to Congress that it sounds tough while setting no real limits on the staggering interest rates charged by payday lenders.
About 225,000 service members use payday loans, roughly 17 percent of its personnel. On Thursday, Defense Undersecretary David Chu urged a Senate committee to cap the interest rates. Chu, whose primary concern is the readiness of troops to deploy for combat, said he thought even the proposed 36-percent cap is "a high number."
Davis can influence the fate of the amendment because he sits on the conference committee of House and Senate members who are settling differences in their chambers' versions of the 2007 defense authorization bill, to which the amendment is attached.
Nelson, the Florida senator, intends to keep his amendment with its 36-percent cap in the bill, said Michael Sozan, his legislative counsel.
The conference committee negotiates behind closed doors, frustrating activists who say they are baffled and worried by what Davis is doing. The committee hopes to conclude its work next week, aides said.
"We've requested to see the language of what Davis is offering, but there's apparently nothing in writing, which is hardly comforting," said Kim Warden, vice president of federal affairs at the Center for Responsible Lending.
"The Talent-Nelson amendment is clear, it sets a specific limit, it's been in public since June and it's been endorsed by all the major military and consumer groups," Warden said. "For Davis to come in at the 11th hour and try to add more complicated language is nothing more than muddying the waters."
Reach John Cheves at (202) 383-6036 or at jcheves@herald-leader.com.
Ellie
Davis opposes cap on military payday loans
By John Cheves
HERALD-LEADER STAFF WRITER
WASHINGTON - Rep. Geoff Davis, R-Ky., is fighting a proposal to cap high interest rates for short-term payday loans to military service members at 36 percent, drawing protests from consumer watchdogs and military groups.
The Pentagon has accused payday lenders of surrounding its military posts and exploiting troops, leading to bankruptcies, divorces and ruined careers.
"It would be interesting to know why Congressman Davis is working against the protection of servicemen that no less than the Department of Defense wants from Congress," said Jean Ann Fox, consumer-protection director for the Consumer Federation of America.
An aide to Davis yesterday said the congressman has consulted CNG Financial of Mason, Ohio, one of his top campaign donors and owner of national payday lender Check 'n Go.
CNG executives have given Davis $11,450 for his race this year against Democrat Ken Lucas, according to an analysis by the Center for Responsive Politics.
But Davis -- a freshman congressman representing Northern Kentucky and himself an Army veteran -- wants to strengthen protections for service members, not weaken them, said chief of staff Justin Brasell.
Davis objects to the amendment written by Sens. Jim Talent, R-Mo., and Bill Nelson, D-Fla., and passed by the Senate in June because it would impose a 36-percent cap only on payday lenders. It would not cover insurance companies, investment brokers and others that target service members with ruinous hidden fees, Brasell said.
CNG Financial did not return a call seeking comment yesterday. But the payday lending industry, represented in Washington by the Community Financial Services Association, said it supports Davis in his fight to defeat the Talent-Nelson amendment.
"We oppose the 36-percent rate cap because it would essentially end our business with the military," said CFSA spokesman Steve Schlein. "Congressman Davis' approach is much more thoughtful."
In place of the proposed amendment, Davis prefers to insert some or all of a House bill he has written, which would not set a specific cap for interest rates. Instead, it would establish broad guidelines intended to curb abusive financial practices toward service members, Brasell said.
"That's our main concern, that the coverage is comprehensive and it's not just targeted at part of the businesses who lend to the military," Brasell said.
Payday loans tend to be small -- about $350 on average -- and are due on the next payday, often in two weeks. They cost from 390 to 780 percent at an annual interest rate, according to a critical report on the industry issued last month by the Defense Department.
Payday lenders cluster around military bases, drawn to young, financially inexperienced soldiers, sailors and Marines who have guaranteed wages, according to the report. For example, the ZIP code for the south gate of Camp Pendleton, Calif., has 22 payday lenders, or 17 more than would be expected by the local population.
Davis' legislation is opposed by a coalition of military, veterans, consumer-protection and legal groups, who have argued in letters to Congress that it sounds tough while setting no real limits on the staggering interest rates charged by payday lenders.
About 225,000 service members use payday loans, roughly 17 percent of its personnel. On Thursday, Defense Undersecretary David Chu urged a Senate committee to cap the interest rates. Chu, whose primary concern is the readiness of troops to deploy for combat, said he thought even the proposed 36-percent cap is "a high number."
Davis can influence the fate of the amendment because he sits on the conference committee of House and Senate members who are settling differences in their chambers' versions of the 2007 defense authorization bill, to which the amendment is attached.
Nelson, the Florida senator, intends to keep his amendment with its 36-percent cap in the bill, said Michael Sozan, his legislative counsel.
The conference committee negotiates behind closed doors, frustrating activists who say they are baffled and worried by what Davis is doing. The committee hopes to conclude its work next week, aides said.
"We've requested to see the language of what Davis is offering, but there's apparently nothing in writing, which is hardly comforting," said Kim Warden, vice president of federal affairs at the Center for Responsible Lending.
"The Talent-Nelson amendment is clear, it sets a specific limit, it's been in public since June and it's been endorsed by all the major military and consumer groups," Warden said. "For Davis to come in at the 11th hour and try to add more complicated language is nothing more than muddying the waters."
Reach John Cheves at (202) 383-6036 or at jcheves@herald-leader.com.
Ellie