WASHINGTON — Even before there has been much time to discuss implementing regulations, America's Community Bankers is raising concerns about the provision in the Department of Defense reauthorization to cap interest rates to military personnel at 36%.

"There is an intended consequence with which most reasonable people don't disagree," ACB Executive Vice President and Managing Director of Government Relations Robert Davis said. The idea was to protect service men and women from unregulated lenders. However, "There is a lack of direct and required coordination between all the consumer lending laws," he explained. According to Davis, the interest rate cap under the DoD reauthorization would include all fees associated with the account. So a bank or credit union "can easily be in violation of the 36% cap" by charging a late fee on a low balance account. "Something was passed so quickly and without consultation with the Senate Banking and Financial Services committees…We hope to see the DoD coordinate with the financial regulators" but there is nothing to require the regs be compatible, he pointed out. CUNA Vice President of Legislative Affairs Dean Sagar called the bankers' claims "trade association rhetoric." He said he does not expect to see the Armed Service Committee reconsidering the legislation and even if they gain traction in the Financial Services Committee, it will not be considered until this time next year. "We obviously do not feel that way and are already talking with the Defense [CU] Council, with the consumer groups and others to make sure we're in the best position we can be to work with NCUA to influence those rules," Sagar commented. "I think they're trying to create worse case scenarios to make sure that everyone is scared into at least looking at it more carefully," he added. "I don't know why else they'd be doing this."

At least one other group understands the logic. A spokesperson for NAFCU told Credit Union Times, "NAFCU is urging Congress to give joint rulemaking authority to all the functional regulators." –[email protected]