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A new federal law that will impose a mere 36 percent cap on payday loans to troops effective Oct. 1, 2007 to limit the hardship faced by American soldiers serving overseas. Payday-lending businesses, also called payday advance or deferred deposit providers, typically give loans in the range of $100 to $500, charging $45 fee on a $300 loan, said Stephen Altobelli, spokesman for the Coalition for Financial Choice. For a two-week loan, the effective interest is 400% to 800% annually. However, large players in the payday loan industry are withdrawing from the military market nationwide, and many are planning to quit lending to soldiers and sailors in California starting Jan. 1, if not sooner. “We've done the math. In every transaction we would end up losing money,” said Dan Gwaltney, chief financial officer of Payday Loan Corp. Moneytree Inc. is another national giant preparing to turn away troops. “We'd lose money in every transaction. It's not going to happen,” said Mark Thomson, director of government affairs for Seattle-based Moneytree. However, the industry cannot unilaterally pull out of California's military market under state anti-discrimination law. And further AB 7 legislation may be pending to disallow refusal to lend to the military in California. Similar legislation in other states. Revenues at Payday loans companies, topping three billion dollars per year, are healthy.
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