Sen. Tim Johnson (D-Citibank) Wants to Roll Back Landmark Law on Predatory Lending to Military Servicemembers

by Ira Rheingold

While many in the consumer advocacy community are excited about the recent change to leadership in Congress, we need to recognize that oftentimes there is not a dime’s (make that a corporate millions) bit of difference between Democrats and Republicans when it comes to the issues we care about.  Just check out these quotes, about the great legislation on predatory lending to the military (the Talent-Nelson amendment) that was passed just this October, from a leading Democrat on the Senate Banking Committee in Wednesday’s American Banker:

Sen. Tim Johnson said in an interview that a top priority is the military lending measure, which caps at 36% the annual percentage rate, including fees, that can be charged to service members and their dependents. The South Dakota Democrat warned that the provision--intended to curb payday lending--may interfere with the credit system.

The measure "may have a lot of unintended consequences that will go far beyond just the payday industry," he said. "We are going to have to revisit that issue and make sure that the end result of this legislation isn't to deny military members and their families access to banking services that they've always assumed would be there."

The measure, written by Sen. Jim Talent, R-Mo., who narrowly lost his reelection bid last week, "flew through here awful quickly in a very political environment," Sen. Johnson said.

Though he said he was sympathetic to the problem, noting that one of his sons was an Army veteran, he warned that carve-outs for specific types of people could set a dangerous precedent.

This time it's military. Who's to say it isn't going to be widows and orphans or other sympathetic groups in the future?" he asked. "We need to address the needs of people who have short-term, low-denominational credit needs, but I fear that the legislation we passed is going to have unintended consequences that were not fully thought through."

Can you imagine Congress thinking about extending the protection of a 36% rate cap on small loans to “widows and orphans?” Folks, we do have an opportunity in the next Congress to pass real consumer protection laws. But don’t fool yourself; many of the new leaders in Congress are not our friends, and we have a lot of hard work ahead of us.

Related Links:

Consumer Debt, the Military, and Iraq

Congress to Limit Predatory Lending to Military

Defense Department Appropriations Bill Includes Precedent-Setting Ban on Arbitration Clauses

Senate Banking Hears Testimony on Predatory Lending to the Military

Comments

[Brian]

Aren't you being a bit hard on Senator Johnson? He's simply concerned that those who serve our country won't have the same right as other consumers to borrow at 300% interest.

[Greg]

Wow.

South Dakota is the corporate home of many credit card companies and credit-lending banks, right? So I guess I shouldn't be surprised, but I am!

[Neal]

Sigh... if it's not the Repulsicans if the Democrooks.

[Chet the Vet]

I think the bigest thing is that vets need to be educated about how to use money and credit and what their options are when obtaining any kind of financing. I don't think that capping rates that can be charged to a specific group is ethical and I think that we have losed our sense of personal resposibility when it comes to these matters. Vets just need to use good common sense and do some research! go to http://www.bankrate.com or http://www.vareficenter.com and compare interest rates. We just need to make a habit of reading the fine print and bieng financially literate.

[FHA GURU]

We need to take care of our military members. It is going to take education bottom line. Both of the people doing the finance and the borrowers that rely on the financers to do the educating.

See http://onlinefhaservices.com

[fha refinance]

It is hard for military people because they are called to serve and have to drop their lives to respond and many times their credit is dropped as well. Thanks for your service.

[Bob]

In your article you state that there are some new members in congress who are not our friends. You are so right. The BIG election is coming up next (as of this posting). Let's hope we get lucky. It always seem to be a crap shoot.