The association also spent $400,000 on direct mail to credit union members urging them to support Udall, who has introduced legislation to remove the member business lending cap.

NAFCU said it donated $7,500 to Udall through its PAC.

"Many of our men and women in uniform have been victimized by predatory lenders who charge outrageous interest rates, putting troops at risk. That's why I have led the fight to get the Pentagon to overhaul regulations implementing the Military Lending Act and ensure service members and their families are not victimized by scammers and unscrupulous lenders," Udall said in September when the proposal was announced.

"I am proud the U.S. Department of Defense responded to my call and took these common-sense steps. I will keep fighting, though, to ensure the Pentagon and Consumer Financial Protection Bureau continue to work to protect our service members from predatory lending schemes," he added.

NCUA regulations allow federal credit unions to offer payday alternative loans with an interest rate of up to 28%. The application fee cannot be more than $20. Under the Military Lending Act, consumer credit to covered borrowers is subject to a 36% cap on the military annual percentage rate, which includes application fees.

According to the NCUA, modifying these regulations to cover payday alternative loans would cause the rate and fee for many payday alternative loans to rise above the military APR cap.

The NCUA said approximately 500 federal credit unions offer payday alternative loans and hold about $23 million in outstanding loans, with an average loan balance of $382.

"Before finalizing NCUA's payday lending alternative rule, we specifically considered how NCUA's rule would fit with existing Defense Department regulations and determined that they were in sync," NCUA Board Chairman Debbie Matz said in a statement.

"However, the Defense Department's new proposed rule would broaden the definition of 'consumer credit' under Military Lending Act regulations in a way that would prevent federal credit unions from making payday alternative loans permitted by our rule," she added.

Quincy Enoch, associate director of legislative affairs and military liaison at NAFCU, told CU Times the trade group will continue its ongoing dialogue with members of the Armed Services Committee, including Udall, about the new Military Lending Act proposal and other defense issues important to credit unions. 

"We agree that protecting the members of our armed forces from predatory products is important. We are reviewing the proposal for its impact on the high quality and safe products our nation's credit unions provide to the members of our military every day and will be sharing our concerns through the official comment process and with Members of Congress in an effort to ensure that credit unions will be able to continue to provide the critical financial services that servicemembers have come to depend on," Enoch said.