An Upstate company that is the nation's largest payday lender has decided to stop making short-term cash advances to members of the armed forces.

Spartanburg-based Advance America said it will cease doing business with full-time active-duty military personnel Oct. 15 in response to criticism from lawmakers and the Pentagon.

The company said it will "voluntarily refrain" from the practice to "remove any perceived distraction to members of the military during this critical time for our country."

The move comes a week after Congress reviewed a Department of Defense request to cap at 36 percent the annual interest payday companies can charge U.S. service members for the high-cost, short-term loans. Lawmakers are considering legislation to that effect.

The Pentagon has expressed concern that excessive debt its troops incur through payday loans undermines military readiness and affects morale. The Defense Department estimates 225,000 service members, or 17 percent, use payday loans.

Jamie Fulmer, an Advance America spokesman, said the company "respectfully disagrees" with critics of its military lending practices. He added that the

affected "men and women will be denied a valuable credit option."

"Some critics say we prey on the military," Fulmer said. "That's simply not the case."

He said the company's charges are comparable to what banks charge check bouncers. If a $10 check is returned, the bank's fee is likely to be around $32, which equates to a high annual percentage rate, Fulmer said.

Advance America, which reported net revenue of almost $269 million for the first half of the year, said military loans account for 1 percent of its business. It also said 42 of the 2,728 Advance America locations are within a mile of a military base.

Payday loans are available to people who have a checking account. Consumers can borrow up to $300 by writing a check to the lender. The check is held until the customer's next payday, typically two weeks.

The cost can be up to $15 for every $100 borrowed, which translates to an annualized interest rate of almost 400 percent. That means a person who takes a $300 advance owes $345 two weeks later. Borrowers who can't repay the initial debt can pay the $45 interest and take out a new loan to cover the balance.

During the application process, Advance America customers must present a bank statement and paycheck stubs, as well as other forms of identification.

Fulmer said it will turn away any borrowers whose ID shows they are serving on active duty in the armed forces. Spouses and other dependents can still qualify for loans from the company if they can show they have employment outside the military.

Some industry critics are skeptical about the timing of Advance America's new policy and how long the company will enforce it.

"It's a huge political move on their part," said Sue Berkowitz, director of the South Carolina Appleseed Legal Justice Center, a Columbia-based group that provides legal services for the poor.

Fulmer said the company is looking beyond the short-term. "I would categorize it as a permanent decision," he said.

As of June 30, Advance America has expanded to 36 states. The company, co-founded in 1997 by former South Carolina legislator George D. Johnson Jr., opened 88 loan centers nationwide during the first half of this year. It has 115 locations in South Carolina.

Have your say

AARP South Carolina is sponsoring a town-hall-style meeting in Charleston during which consumers can voice their opinions about the payday lending industry. The meeting is free and open to the public.

When: Oct. 12, 5:30 p.m.

Where: The Citadel Holliday Alumni Center, 69 Hagood Ave., Charleston.

Reach Peter Hull at 937-5594 or phull@postandcourier.com.

The Associated Presscontributed to this report.