Loan Charges

Democrats target U.S. Rep. McSally after she votes to delay new rules protecting military members from predatory lenders

Republican Congresswoman Martha McSally came under fire last week after she voted for a delay in new Department of Defense rules meant to protect members of the military from predatory lenders.

The vote came in the wee hours of Thursday, April 30, when lawmakers were marking up the National Defense Authorization Act, a lengthy and complex bill that outlines funding for the nation's military.

Tucked away in the legislation was a provision to require the Department of Defense to further study a proposed rule that would place new restrictions on the types of loans that lenders can make to service members under the Military Lending Act.

The Department of Defense limited the ability of members of the military to take out high-interest loans after Congress passed certain restrictions in 2006. But lenders found various loopholes to continue with predatory loans, so Congress passed another law in 2012 to further restrict the ability to lenders to provide high-interest, short-term loans.

In September 2014, the Department of Defense released a report outlining new restrictions to prevent predatory lending, with the new rules set to be finalized this month, according to the Federal Register.

But a provision in the National Defense Authorization Act—pushed by lobbyists for various lenders, according to Bloomberg News—would have required a new study, due in March 2016, to justify the rules, along with a 60-day review congressional review period.

Congresswoman Tammy Duckworth, an Illinois Democrat who lost both her legs while serving as a U.S. Army helicopter pilot in Iraq, offered an amendment stripping out the language that would have delayed the predatory-lending rules. The amendment passed on a 32-30 vote, with five Republicans crossing party lines to vote alongside all of the Democrats on the committee.

McSally voted against the Duckworth amendment.

McSally spokesman Patrick Ptak said the vote shouldn't be viewed as supporting the predatory lending industry. He said during McSally's career in the military, she "worked tirelessly to make sure military families were not preyed upon and made good financial decisions and that those in financial need had avenues to get assistance. She strongly supports protecting military families, and all families, from inappropriate or unlawful lending practices."

But in this case, Ptak said, McSally wanted Congress to have oversight of the proposed rule. Ptak said McSally had concerns about whether an existing federal database that would identify whether someone is a member of the military would be overwhelmed with requests if payday lenders began using it along with existing banking institutions that now use it. And he brushed aside concerns from consumer-protection agencies about the delay, saying that while the Department of Defense had until March 2016 to complete the new report, "it certainly could have come sooner."

Kelly Griffith, executive director of the Tucson-based Southwest Center for Economic Integrity, said she was "absolutely stunned" that McSally voted against the Duckworth amendment. She said that she briefed McSally's staff on the details of the Department of Defense's new rule earlier this year and sent an email alerting them to the provision to delay the rule in the National Defense Authorization Act.

"This is a non-partisan issue, in my opinion," Griffith said. "It's a very important issue, an issue of fairness, but it's not a Democratic issue, per se, or a Republican issue, per se. I thought it was a no-brainer that McSally would vote the right way on this thing."

While Ptak said that McSally was concerned that home loans might be caught up in the new rule, Griffith said that was not the case.

"The Military Lending Act does not apply to home loans," Griffith said. "This is about predatory small loans that are the bane of many military bases around the country including our own bases right here in Tucson and Sierra Vista."

The Democratic Party, both in Arizona and D.C., is highlighting McSally's vote. On Friday, May 1, Arizona Democratic Party spokeswoman Barbara Lubin called McSally's opposition to Duckworth's amendment "unconscionable."

"Congresswoman McSally had an opportunity to back up her empty rhetoric of being an independent voice for CD2," said Lubin in a prepared statement. "Instead of protecting vulnerable service members, she acted as a shill for predatory lenders and their well-connected lobbyists."

Meanwhile, the Democratic Congressional Campaign Committee targeted McSally's vote on the issue with mailers and web ads this week.

"By voting to delay protections for our troops from predatory lenders, Congresswoman McSally made it clear that she'll go to bat for payday lenders and special interests, even if it means turning her back on service members and their families," said Matt Thornton of the DCCC in a press release announcing the campaign.

In related National Defense Authorization Act news: McSally pushed for $682.7 million in funding for the A-10 Warthog and $48.3 million in funding for the EC-130H Compass Call. Both aircraft are stationed at Davis-Monthan Air Force Base.

"With the passage of this bill, we clear a major hurdle to keeping these planes flying and protecting our troops in combat," said McSally in a written statement. "Not only does the legislation fully fund both platforms, but the amendments I offered will prevent any additional backdoor divestment attempts, such as more transfers to backup status next year."

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