The John Warner National Defense Authorization Act (referred to as TALENT Amendment) AND its Effects on Payday Lending

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Currently the only federal law that exists on payday loans was born from The John Warner National Defense Authorization Act or TALENT Amendment or as H.R. 5122 The main goal for this amendment was to allocate $500 billion to military and defense related activities for the fiscal year of 2007. It also included a temporary expansion of the president's power over the military but that part was repealed in 2008. It also included the elimination of a position of a high ranking office in Iraq as of October 1, 2007, transitioning responsibilities to the Inspector General's offices in the departments of State and Defense, since Iraq is a sovereign nation. So how does this relate to payday loans? Well, it's in the fine print.

Inside this amendment described above, is a small piece of legislation that addresses Sec. 670 Limitations on Terms and Consumer Credit Extended to Service Members and Dependents that amends Chapter 49, title 10, United States Code, and adds a new section, sec. 987, that addresses the terms of consumer credit extended to members and dependants of the armed forces.

Under this new section, lenders (any lenders including payday lenders) are no longer allowed to extend loans that exceed 36% APR, including all fees, to any active or reserve member of the armed forces, including their dependants and or spouses, effective Oct. 1, 2007.

The reason this amendment was included in The John Warner National Defense Authorization, can be directly contributed to U.S. Senator Jim Talent (hence TALENT amendment) and U.S. Congressman Sam Graves, both from Missouri. They assembled a bipartisan group of 31 Senators that sent letters to the Defense Authorization conferees, urging them to maintain a provision to stop predatory lenders (please insert hyperlink to article 18 on predatory lending)from targeting service members and their families. In June of 2006, Senators Talent and others introduced this amendment to Department of Defense's annual Authorization Bill and the bill and amendment were obviously passed and took effect in October of 2007.

One thing that is lesser known about this amendment is that it currently exists with a sunset date of September 30, 2012. This means that unless that piece of legislation is amended or encompassed into a new piece of legislation by the sunset date, the provision will cease to exist, hence no more 36% rate cap for military families, their spouses and/or dependents.

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