[Congressional Record Volume 151, Number 88 (Tuesday, June 28, 2005)]
[Extensions of Remarks]
[Page E1386]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          MILITARY PERSONNEL FINANCIAL SERVICES PROTECTION ACT

                                 ______
                                 

                               speech of

                         HON. LUIS V. GUTIERREZ

                              of illinois

                    in the house of representatives

                         Tuesday, June 28, 2005

  Mr. GUTIERREZ. Mr. Speaker, I strongly support the Military Personnel 
Financial Services Protection Act, H.R. 458. We passed this bill last 
year, and it is designed to prevent predatory companies from using the 
imprimatur of the U.S. Military to prey on financially vulnerable 
service members by selling them insurance and investment products with 
little or no value. During consideration of this bill in the Financial 
Services Committee, I offered an amendment to extend these protections 
to abusive lenders who prey on our troops, such as payday lenders. 
These payday loans are the most abusive financial product being offered 
to our troops today, and, according to military personnel, payday loans 
threaten troop readiness. The New York Times and other news outlets 
have reported extensively on this problem.
  Noncommissioned officers at the Army base in Fort Bragg, North 
Carolina, say they counsel two to three soldiers per week who are 
indebted to payday lenders. ``It's legalized thievery,'' says Sgt. 1st 
Class Andrew Perrin, a member of the XVIIIth (18th) Airborne Corps at 
Fort Bragg.
  These companies put pressure on soldiers because they can be 
discharged if they default on too much debt, Perrin says. Staff Sgt. 
Carlton Brown says soldiers become distracted from their duties as they 
struggle to make payments and avoid disciplinary action. ``It affects a 
soldier's mission readiness, and that can affect a whole unit, big 
time,'' Brown says.
  The amendment I offered in Committee drew on the idea of my colleague 
Sam Graves, who introduced legislation capping interest rates on payday 
loans for service members. During that markup, Chairman Oxley agreed to 
work with me to include provisions regarding abusive lending in the 
manager's amendment for floor consideration. I am very pleased that our 
work has resulted in the inclusion of some basic, but important 
protections for our troops, against payday lenders and other abusive 
lenders who target our troops. I want to thank him and his staff for 
the countless hours they spent working to hammer out this compromise. I 
also want to thank Ranking Member Frank, Congressman Davis and their 
staffs for their hard work bringing this to fruition. Under this 
legislation, lenders (of both payday and other small loans) who target 
the military can no longer continue a number of egregious practices, 
including: requiring the involuntary assignment of military wages to 
secure payment of a loan; contacting, or threatening to contact the 
borrower's commanding officer or others in the military chain of 
command in effort to collect a loan; requiring the borrower to waive 
any rights under Federal or State law, including the Servicemembers 
Civil Relief Act; or using any words or symbols that create the 
impression that any department of the military endorses the lender or 
any service or product of the lender. I am sorry to say that all of 
these unconscionable practices are currently used by certain payday or 
short term lenders.

  In addition, extremely high cost loans must be accompanied by a 
disclosure notice that informs the consumer of these protections and 
that there are other options available including grants or interest 
free loans from the military relief societies in the case of a family 
or other emergency.
  This may not sound like a lot, and I do wish that it contained 
additional limitations on the loan amount and the number of turnovers 
by payday lenders, similar to legislation recently enacted in my home 
State of Illinois, but this is a good start, since many of these payday 
and other short term lenders completely evade regulation by the States 
and Federal Government. I look forward to continuing to work on this 
issue.
  The Navy's senior enlisted Sailor, Master Chief Petty Officer of the 
Navy Terry Scott testified earlier this year in front of the House 
Appropriations Committee about the pernicious nature of these payday 
loans. Scott characterized the industry as one ``that has made it a 
practice to prey upon our Sailors.'' Payday loan outlets, he said, 
often are found within a short walk outside the gates in the 
communities that surround Navy homeports, offering easy loans but with 
very high interest rates as compared to commercial lenders. He told the 
subcommittee that many who turn to these payday loan outlets end up far 
worse off than before.
  ``It is not being dramatic to state these payday loans to our troops 
could be a threat to their military readiness,'' he said.
  Payday loans are the most abusive financial product preying on 
consumers today, but service members, who can lose their job or even be 
court-martialed if they are in too much debt, suffer 
disproportionately. Those who claim to support the troops should agree 
to restrict the worst financial product out there. Once again, I thank 
my colleagues for their help in securing these provisions and look 
forward to working with them in the future.

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