military lending act

Military Lending Act rules release fitting act for anniversary of consumer law and agency

Written by Dory Rand on July 21, 2015 - 5:26pm

While it was obvious to Holly Petraeus, Assistant Director for the Office of Servicemember Affairs, and others who visit areas near military bases that high-cost, predatory lenders were preying on vulnerable service members and their families.

Duckworth ensures new financial protections for servicemembers are not delayed

The Military Lending Act (MLA) protects servicemembers and their families  from high-cost, predatory consumer credit products and caps annual percentage rates (APR) at 36 percent. Unfortunately, the current MLA definition of “consumer credit” is too narrow, allowing lenders to get around the APR cap and offer loan products that often lead to long-term debt problems.

CFPB Reports on Loopholes in Military Lending Act

CFPB notes that the current definitions of credit products in the DoD’s MLA rules are too narrow and leave many military servicemembers at risk; only three credit products are defined. CFPB’s report emphasizes the need for the DoD to change the MLA rules to include all types of payday, installment, auto title loans, and open-end lines of credit. The DoD did expand the definitions of credit products to include longer-term loans and auto title loans in its latest proposed rules.

Proposed MLA Rules Help Service Members Nationwide

Passed by Congress in 2007, the MLA was designed to ensure that military service members and their families have access to safe and affordable small dollar loans and credit. It set a 36 percent annual percentage rate cap on certain loans and credit products offered to people who serve in the armed forces. While the law curtailed many of the worst industry practices, it was not expansive enough to cover the wide range of high-cost, predatory products that exist today.

Comment letter to the Department of Defense supporting regulations that close loopholes in the Military Lending Act

The Military Lending Act (MLA) sets a 36 percent rate cap on consumer credit for service members and authorizes the Department of Defense to define “consumer credit.” The existing definition is narrow and allows high-cost lenders to continue to target service members. This letter supports new proposed rules that expand the definition of “consumer credit” to include all forms of credit subject to the Truth in Lending Act and not excluded by the MLA. The letter also urges the Department to include overdraft programs and rent-to-own transactions in its definition of consumer credit.

Op-Ed: Honor Veterans By Urging Congress to Reign in Payday Lenders (The Village Free Press)

Payday lenders are the modern day equivalent of loan sharks, aggressively marketing unaffordable loans as a way to meet a one-time need. In truth, payday lenders know that borrowers cannot both repay the loan and cover their living expenses. To do so, they will need another loan, which requires payment of another fee. This is the payday loan debt trap, where interest rates average 400 percent. The vicious cycle of debt is not a side effect of payday lending—it is the business model of payday lending. Three-quarters of payday loan fees come from borrowers with 10 or more loans per year.

Woodstock Institute Calls on Illinois Members of Congress to Honor Veterans by Reining in Payday Lenders

Payday lenders are the modern day equivalent of loan sharks, aggressively marketing unaffordable loans as a way to meet a one-time need. In truth, payday lenders know that borrowers cannot both repay the loan and cover their living expenses. To do so, they will need another loan, which requires payment of another fee. This is the payday loan debt trap, where interest rates average 400 percent. The vicious cycle of debt is not a side effect of payday lending—it is the business model of payday lending.

Wish the Consumer Financial Protection Bureau a happy third birthday

The CFPB was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act as the first federal financial regulator whose focus is protecting the rights of consumers.

No matter who you are—a credit card borrower, student borrower, homeowner, servicemember, or more—the CFPB is making major strides to ensure that you can safely do business with financial institutions.

Ensuring that service members have protections for all types of high-cost credit products

Many  service members are young, face expensive situations where they must pick up and move at the drop of a hat, and may be stationed far from family and friends who could help them in times of need. High-cost lenders know that these factors make quick cash alluring to service members and frequently set up shop near military bases. The cycle of debt can be especially devastating for service members, who could lose their security clearance and even their jobs due to blemished credit histories.

Comment Letter to the Department of Defense supporting expansion of protections to service members under the Military Lending Act

This comment letter encourages the Department of Defense to expand the Military Lending Act (MLA) to ensure that service members and their families are protected from all forms of high-cost credit. Passed in 2007, the MLA instituted a 36 percent annual percentage rate (APR) cap for certain kinds of payday loans and auto title loans. A number of states, including Illinois, have high-cost loan products that fall outside the boundaries of the MLA. This means the 18,000 active duty  service members in Illinois are still being marketed products with triple digit interest rates.

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