WASHINGTON

Buried deep in the Defense Authorization Bill is an amendment by U.S. Sen. Elizabeth Dole, R-N.C., that has military advocates cheering and consumer advocates cringing.

Dole, a member of the Armed Services Committee and the Banking Committee, wants to make it more difficult for payday lenders to take advantage of military personnel. Her amendment, which is part of the larger defense bill, has not been formalized yet and is still being written.

"This is a very important issue to those in uniform," said Joseph Barnes, the national executive secretary for the Fleet Reserve Association. The FRA is a congressional chartered organization that represents the interests of military personnel from the Navy, Coast Guard and Marines.

Predatory lending has no specific definition. It refers to lending practices that are generally considered deceptive because the lender takes unfair advantage of the borrower by charging high interest and large fees. North Carolina is one of only 15 states to prohibit payday lending, which is one of the more common types of so-called predatory lending.

It has not been legal under North Carolina law since 2001, but payday lenders have continued to operate in the state using their affiliation with federally chartered lenders.

Barnes has seen Dole's legislation and said it's a good start. He said he hopes that it will bring needed attention to an issue that he said is both distracting and draining - emotionally as well as financially - on military families. Many of those affected are younger members who are on their own and away from home for the first time, Barnes said.

"In the media, they see expensive cars and stereos and they want those," Barnes said.

A May 2003 report by the National Consumer Law Center illustrates the problem. The report, which was included in a recent study conducted by the Government Accountability Office, said that junior enlisted service members are targeted because they have "a relatively low but secure income and tend to be young and financially inexperienced."

John Alexander, the director of communications for the Navy and Marine Corps Relief Society, said that his organization tries to alert service personnel to the "pitfalls" of predatory lenders, but they are not always successful. Last year, the organization paid more than $1 million to families to help deal with the "pitfalls," he said.

Alexander was not aware of the specific details of Dole's bill, but, like Barnes, welcomed the attention it would bring to the subject.

Both men, and other military groups contacted who had seen her amendment, agreed that it was not the final solution. However, they said that the legislation is a good start.

As it stands, the amendment would require the Department of Defense and the Federal Reserve to report in 90 days to committees Dole serves on, and to counterparts in the House of Representatives, about predatory-lending practices directed at military personnel.

The GAO report, which was released in April, said that the Department of Defense is not doing enough to curb these practices but also said that it was unclear how many military personnel were affected.

"The extent to which active duty service members use consumer loans considered to be predatory in nature and the effects of such borrowing are unknown, but many sources suggest that providers of such loans may be targeting service members," the report said.

The amendment would also prohibit lending institutions from garnishing wages of military personnel to pay off the debts or talking to their superiors about outstanding debts. However, the restrictions would apply only to lenders that do at least 10 percent of their business with military personnel.

This section of the bill worries consumer advocates. They say that these actions are already prohibited by law and a new law would confuse military service members and institutions.

"This amendment is so unbelievably draconian because it pretends to be doing something that it is so clearly not," said Margot Saunders, an attorney with the National Consumer Law Center in Washington.

"It doesn't add anything to existing law, but it leads people to think something has been done. It's clearly written to do no good," said Saunders, who in the late 1970s worked for the Northwestern North Carolina Legal Aid Society in Winston-Salem.

Saunders worries that the momentum driving the amendment will be lost once it passes because people will incorrectly believe that the problem has been resolved.

Peter Skillern, the executive director of the Community Reinvestment Association of North Carolina, agreed.

He is also concerned because only a few lenders would qualify in the new law, because military personnel would not make up 10 percent of business at many lenders.

"There are no enforcement provisions, so I am concerned that it is actually going to do more harm than good," he said.

Dole was not available for comment. Her representatives, however, said that she was aware of the concerns and reiterated that the wording of the amendment was still being finalized.

• Mary M. Shaffrey can be reached in Washington at (202) 662-7672 or at mshaffrey@wsjournal.com