Today, the Department of Defense released a proposed rule updating the Military Lending Act, which protects military servicemembers from predatory lending practices. The proposed rule closes several key loopholes that previously allowed lenders to trap servicemembers in a high-cost cycle of debt.
“We applaud the Department of Defense and the Obama Administration for taking action to protect the financial well-being of our servicemembers as well as our national security,” said Dory Rand, president of Woodstock Institute.
Previously, the Military Lending Act capped the annual interest rates for consumer credit to servicemembers at 36 percent, but the Department of Defense defined covered loans as payday loans with terms up to 91 days and car title loans up to 181 days. That created a loophole which the industry exploited by offering loans with longer terms, trapping servicemembers in high-interest rate payday and car title loans.
The proposed rule closes some loopholes by applying the 36 percent rate cap to predatory loans regardless of the length or amount of the loan, and including additional types of loan products such as installment loans and overdraft.
For more information, please contact Dory Rand at firstname.lastname@example.org or 312-368-0310.