WASHINGTON — The Community Financial Services Association of America hailed a Sept. 4 report from the Government Accountability Office that found some of the Department of Defense's initial report conclusions lacking evidence (see related story, page 1-60-61).
The 2006 National Defense Authorization Act required the DoD to report on certain mandated issues, including the prevalence and effects of predatory lending, and make legislative and regulatory recommendations. "DoD issued a report on predatory lending that addressed the mandated issues, but it contained limited support for some of its findings and recommendations," a GAO summary of the report stated. The GAO is the apolitical research arm of Congress.
"All mandated organizations and groups stated that they had commented on DoD's report, although DoD appears to have consulted with military charity organizations and consumer groups more than with the federal agencies identified in the report," GAO commented. The authors of the DoD report said they might have done things differently given more time.
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"Even though DoD provided several sources illustrating the negative effect that predatory loans have on servicemembers, our evaluation of the DoD's report revealed methodological problems in some of its analyses and in some of the studies cited in its report, particularly for the description of the prevalence and assessment of the effects of predatory lending practices," GAO stated. While the report showed percentages of servicemembers using the targeted loan products and the percentage experiencing financial difficulties, there was no definitive correlation made between the two.
GAO concluded, "While DoD's report addressed the requirements in the mandate, the shortcomings we identified in some of the methods and approach indicate that caution is necessary when interpreting the findings for some areas of DoD's report."
CFSA President Darrin Andersen latched onto the report. "Our suspicion that the DoD worked closely with payday lending critics and relied on limited information and flawed methodology to come up with their recommendations has been confirmed," he said. "Unfortunately, lawmakers took the DoD recommendations as gospel and passed legislation that will limit service members' access to credit. We now know these recommendations and the resulting legislation were not grounded in sound research."
Andersen added, "As a result of the DoD report and resulting legislation, service members will no longer have access to payday loans to help with their unbudgeted expenses."
The GAO study was requested by Senators Tim Johnson (D-S.D.), chairman of the Senate Banking Committee's Subcommittee on Financial Institutions, and Lindsey Graham (R-S.C.), ranking member of the Senate Armed Services Committee's Subcommittee on Personnel.
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