Magazine article American Banker

New Calif. Panel Chief Has Payday Lending in Sights

Magazine article American Banker

New Calif. Panel Chief Has Payday Lending in Sights

Article excerpt

Protecting military families from abusive payday lenders is a priority this year for Assemblyman Ted Lieu, who became the chairman of the California Assembly's Banking and Finance Committee this session.

Last month the El Segundo Democrat introduced a bill that would give the state authority to enforce the federal Talent Amendment there, as well as a bill to rein in deceptive advertising by payday lenders.

The first bill, AB 7, would update California's laws to specify that lenders must abide by the provisions of federal laws that protect military personnel, including the Talent Amendment, when providing them products. The amendment, included in the last year's Defense Department authorization bill, set an interest rate cap on loans to military families.

In an interview early this month, Assemblyman Lieu said that he fears the Talent Amendment would not be enforced without the change to state law, and that it is not realistic to expect the Pentagon to enforce the rate cap.

"They are fighting two wars -- in Afghanistan and Iraq -- and they have zero resources to do this," he said.

The Defense Department is crafting the final rule to implement the amendment's 36% interest rate cap on payday loans. Industry groups have provided written proposals and held talks with the department, which is expected to issue the rule by October.

As the Banking Committee chairman, Assemblyman Lieu succeeded Ron Calderon, D-Montebello, who was elected to the state Senate in November. The new chairman said that as a major in the Air Force Reserve and a former active-duty military lawyer, he is familiar with the consequences of payday lending.

"There is a hammer over military folks: If they don't pay their debt, they can be court-martialed," he said.

The solution is both to regulate the payday lenders and educate people about finances, he said. …

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