House Committee Defeats Push to Delay Pentagon's Lending Rules

The Pentagon will move forward with new restrictions on high-cost loans to soldiers after a Republican-led effort to delay those rules failed early Thursday on Capitol Hill.

The House Armed Services Committee voted 32-30 to jettison a controversial provision that would have required the Defense Department to study the issue further before issuing regulations, according to a spokesman for Rep. Tammy Duckworth, D-Ill.

Five Republicans joined 27 Democrats to defeat the measure, according to a tally of the votes.

The provision in question would have forced a delay in a forthcoming effort by the Pentagon to close loopholes in existing restrictions on expensive credit to active-duty members of the military. The rules are expected to be finalized later this year. The legislation would have required the Defense Department to submit a report to Congress by March 1, 2016, before finalizing the regulations.

The provision had been part of a large defense authorization bill that is widely viewed as must-pass legislation. The Armed Services panel voted 60-2 early Thursday to advance the underlying bill.

The effort to delay the new Pentagon rules was supported by financial industry trade groups and opposed by consumer advocacy organizations. Duckworth sponsored the amendment that stripped the contentious provision from the larger bill.

Last September, the Pentagon released proposed rules designed to make it harder for lenders to evade the existing 36% annual percentage rate cap on loans to active-duty military members.

The existing rules exempt installment loans of 82 days or more, and auto-title loans of 182 days or more. Such exemptions have allowed high-cost lenders to tweak their products and continue extending credit to service members.

One of the more controversial parts of the Pentagon proposal involved an existing database that can be used to determine whether borrowers are active-duty service members. Under the Defense Department's proposal, lenders who fail to check the database would face legal liability.

The proposed database rules drew howls from financial industry trade groups. Those groups also argued that they would be forced to design two separate sets of products — one for civilians and one for members of the military.

But consumer groups argued that industry groups were trying to kill important protections for service members and their families.

Before the delay measure was defeated, Robert Weissman, president of Public Citizen, said in a news release: "It is a sign of just how indebted certain members of Congress are to corporate interests that a critical, commonsense regulation that is needed to protect our national security can be sacrificed in service to the predatory lending industry."

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