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WASHINGTON — The nation’s largest payday loan company announced this week it will stop offering loans to servicemembers in response to recent pressure from the Defense Department.

Advance America Cash Advance Centers, based in South Carolina, said starting Oct. 15 its stores will no longer offer any payday advances to active-duty troops or their families.

“We respectfully disagree with [critics’] assessment of our loans and feel like these men and women will now be denied this financial tool,” said Jamie Fulmer, spokesman for the company. “But we will defer to the criticisms raised and remove any perceived distraction from our servicemembers.”

The company has more than 2,700 shops in 36 states. Fulmer said only about 40 of those are located within a mile of a military base, and less than one percent of their total customer base are active-duty troops.

Fulmer said the decision came from increased pressure but not in anticipation of Congress approving strict limits on how instant lenders can deal with military customers.

In June, the Senate included an amendment in the 2007 defense budget bill which would cap all loans to servicemembers at a 36 percent annual interest rate and prevent multiple automatic loan rollovers.

In August, the Defense Department authored a report blasting the industry for preying on young troops, and earlier this month officials petitioned Congress to preserve those loan limits.

Darrin Andersen, president of the payday industry’s Community Financial Services Association of America, said in a statement he did not know if other lenders would follow Advance America’s decision.

“If Congress passes the proposed 36 percent APR rate cap on loans to military personnel, then I expect the entire industry will eventually stop lending to people serving in the military,” he said. “The 36 percent rate cap makes it unfeasible for payday advance stores to make loans.”

But an industry critic called the announcement good news.

Kimberly Warden, vice president for federal affairs at the Center for Responsible lending, said she would have preferred that Advance America admit its loans create a financial trap for cash-strapped servicemembers, but said this represents a step in the right direction.

“The sooner these products are away from bases, the better,” she said.

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