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House targets predatory lending protections for US troops

Republicans and the banking industry teamed up to delay consumer protections for military families. They failed.
US military soldiers march during the Veterans Day Parade in New York on Nov. 11, 2014. (Photo by Jewel Samad/AFP/Getty)
US military soldiers march during the Veterans Day Parade in New York on Nov. 11, 2014.
Predatory lending practices affect plenty of Americans, but as NBC News reported earlier this year, military families are "especially vulnerable." The Consumer Financial Protection Bureau (CFPB) issued a report in December calling for greater protections.
And right now in the U.S. House, there's an important fight underway about just how far those protections can go. The Huffington Post summarized the policy landscape nicely:

In 2006, Congress passed legislation imposing a 36 percent cap on interest rates for payday loans, auto title loans and tax refund anticipation loans to military families. Lenders responded by slightly tweaking the terms of their loans to avoid the limits. Since the law applied to payday loans with terms of 91 days or less, and amounts of $2,000 or less, credit companies were able to shirk the rules with 92-day loans, or loans of $2,001. Big banks were even more creative, issuing "deposit advance products" -- functionally almost identical to payday loans, but with a different name and with effective annual interest rates of around 300 percent. Congress responded to these tricks in 2012 by passing another law directing the Pentagon to fix these loopholes, and new rules were finalized in September of last year.

So, problem solved, right? Wrong. The new protections are poised to take effect -- much to the chagrin of banking lobbyists -- so House Republicans tucked a provision into the military spending bill to delay implementing the new protections for at least another year.
White House Press Secretary Josh Earnest called the proposal "shameful" and Rep. Tammy Duckworth (D-Ill.), an Iraq War veteran, has led the charge against the Republican measure.
This morning, the Military Times reports that Democrats prevailed in killing the delay.

House lawmakers narrowly voted to remove controversial language delaying new rules on payday lenders from their annual defense authorization bill early Thursday morning, calming concerns from advocates who saw the move as potentially undoing financial protections for military families. By a 32 to 30 vote, members of the House Armed Services Committee stripped provisions from the legislation that would have delayed Defense Department plans to expand the scope of the 2006 Military Lending Act by requiring a new report due next spring on DoD's rule-making procedures in that regard.

Opponents of the clause said the rules are already long overdue, and accused supporters of giving predatory lenders a new opportunity to victimize troops.
The banking industry won't be pleased but for consumer advocates, Democrats, and a variety of military advocacy groups, the vote is good news.
Brent Staples noted yesterday, "Service members who are drowning in debt are a burden to the military. They are costly to manage because they need special attention. Beyond that, thousands of service men and women have already been barred from duty abroad because the debt they carried made them security risks. In other words, blocking better debt protections is a terrible idea."
And at least for now, that terrible idea has been defeated.