High interest rates and high fees swamp military members even though the Military Lending Act aims to protect them from predatory lenders. That’s why the Consumer Financial Protection Bureau (CFPB) wants Congress to adopt a Department of Defense proposal to expand protections and close loopholes in the law. We know 4 good reasons to change the Military Lending Act.
HOW IT WORKS
The Military Lending Act bans short-term payday loans up to $2,000 that you must repay within 91 days, auto title loans that you have to repay in 181 days and short-term tax refund loans. But it fails to ban other types of loans with high interest rates
REASON 1-
HIGH FEES
Turns out military members borrow from banks and credit unions more often the rest of us. And they use the deposit advance programs that financial institutions run. This means they borrow where they deposit money and pay high fees to get the loans.
A CFPB report found service members borrowed more than $50 million using deposit advances in a 12-month period. They typically paid fees of $10 on every $100 that they borrowed. Under proposed regulations, fees would be significantly less.
REASON 2-
HIGH INTEREST RATES
Some companies charge military members an annual percentage rate of more than 300 percent.
REASON 3-
COVERS ALL LOANS
The law would cover any payday loan or auto title loan, for any length of time and any amount. The CFPB report found many examples where people pay far more than they should.
In one case, a military spouse spent $5,720.24 to borrow only $2,575.
In another instance a California company charged a service member $3,966.84 to borrow $2,600 for a year.
REASON 4-
HIGH TIME
It’s high time to get serious about protecting military members who don’t get paid enough and often scramble from paycheck to paycheck. Men and women who serve the country and in many cases risk their lives should at the very least deserve the full protection of U.S. law from companies and institutions that take advantage of them.
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