Estimated read time: 2-3 minutes
This archived news story is available only for your personal, non-commercial use. Information in the story may be outdated or superseded by additional information. Reading or replaying the story in its archived form does not constitute a republication of the story.
HILL AIR FORCE BASE, Utah (AP) -- State lawmakers may be calling for restrictions on loans made to military personnel following a recently released Department of Defense report that calls the payday loan industry harmful to the war on terrorism.
"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.
Twelve states prohibit triple-digit rates on payday loans, according to the Consumer Federation of America. They are Arkansas, Connecticut, Georgia, Maine, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Vermont and West Virginia. In New Mexico, borrowers can only renew payday loans twice.
Utah currently doesn't regulate payday loans, but Rep. Paul Ray, R-Clinton, said it's an issue that needs to be looked at.
"Both the religious and military community is very concerned about this issue," Ray said. "I do have some major concerns, especially when it affects the readiness of our troops."
The Pentagon has proposed an interest rate cap of 36 percent.
However, Ray, who works as a commercial mortgage broker, said he isn't sure capping interest rates is the correct course.
"It is still too early to look at that," Ray said. "Putting caps on interest rates can influence other lending areas."
However, a spokesman for the Utah Consumer Lending Association and Check City, a leading short-term loan financial institution, called the federal report flawed and single-sided.
"We think the department's report is deeply flawed," Cort Walker said. "The department relied on anti-business groups that lacked the data to make such a report. What we find interesting is that one of these anti-business groups published the report on its own before it was even given to Congress. It is biased."
Walker said the industry isn't targeting military members and many lending companies bend over backward to help servicemen.
"If there is a member of the military deployed, we would write that loan off," Walker said. "The member would be required to repay principal only. We aren't looking to impede their ability to deploy."
The Pentagon report cites one study that says military personnel are three times more likely to get a payday loan than a civilian. It estimates that 17 percent, or 225,000 members of the active duty force, uses payday loans.
The report said while it can make some improvements through education and regulations governing military personnel, it can't prevent predatory lending without help from Congress and the states.
Sen. Greg Bell, R-Fruit Heights, agrees there is a problem, saying it hurts more than military personnel.
"We need to do more about this industry," Bell said. "They prey on low-income folks as well as the military. These people fall victim to this. To me it's really usury."
------
Information from: Standard-Examiner, http://www.standard.net
(Copyright 2006 by The Associated Press. All Rights Reserved.)
