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Davis now supports loan caps
September 26, 2006 - Lexington, Kentucky
U.S. Rep. Geoff Davis, R-Ky., is backing a proposal to cap high interest rates for short-term payday loans to military service members at 36 percent, a spokesman said yesterday. The decision follows a week of attacks from an opponent and constituents for his previous opposition to the plan. In a statement, Davis claimed credit for a compromise in the 2007 defense reauthorization bill that would impose a 36 percent limit on annual interest rates. Davis said his version of the cap would cover payday loans, as well as fees charged for insurance, investments and other financial products aimed at service members. The original measure focused on payday loans. "As our troops are deployed, they are often faced with difficult financial decisions for themselves and their families," said Davis, who on Nov. 7 faces Democrat Ken Lucas in a race to represent Northern Kentucky. "Ensuring that lenders cannot prey on their financial vulnerability is extremely important to me." Last week, Lucas launched a campaign commercial accusing Davis of "helping predatory payday lenders charge our troops 300 to 400 percent interest." Davis had opposed an amendment on payday lending that included the 36 percent cap, approved by the Senate this summer. The Pentagon says payday lenders surround military posts and exploit troops. News stories about his opposition -- and $11,450 he took for this year's race from CNG Financial of Mason, Ohio, which owns a chain of payday loan stores -- spread across political Web logs on the Internet. Fifteen of his constituents called or wrote to express concern, said Justin Brasell, Davis' chief of staff. Yesterday, a watchdog group that favored the Senate amendment said it is "cautiously optimistic" to hear that Davis now embraces the 36 percent cap. "We know that Congressman Davis is under a lot of pressure in his district to do right here," said Kim Warden, vice president of federal affairs at the Center for Responsible Lending. "But we're going to remain worried about loopholes until we see the actual language and get a final vote," Warden said. "Frankly, we've learned to be cautious because of past legislation that looked good until we saw the asterisk that led to the footnote that reversed half of the original intent." Brasell said Davis has nothing in writing, because the defense reauthorization bill still is being negotiated behind closed doors by a conference committee of House and Senate members, on which Davis sits. But Davis has assurances from House Armed Services Chairman Duncan Hunter, R-Calif., that his compromise measure will be included in the final bill, Brasell said. Sen. Bill Nelson, D-Fla., one of the Senate amendment's co-authors, still hasn't seen Davis' language and is unaware of any agreement, said spokesman Dan McLaughlin. Debate over other sections of the bill are delaying final action, with the House hoping to adjourn Friday until after the elections. Among other areas of disagreement, House Republican leaders want parts of their immigration plan to be attached to the bill. Senate Democrats object. 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 percent to 780 percent at an annual interest rate, according to a critical study of the industry issued last month by the Defense Department. Brasell denied that Davis originally sided with payday lenders. Davis, an Army veteran, always wanted a bill to protect service members from high interest rates, but he did not want new rules limited to payday loans, Brasell said. Under the compromise, other financial-service businesses and their interest and fees also would fall under the 36 percent cap, Brasell said. "Absolutely, this makes it stronger and more comprehensive, and it makes the (interest) cap meaningful because it will cover all sorts of predatory lenders," Brasell said.
News Source
The Herald-Leader, John Cheves, Staff Writer
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