The DoD Seeks Enhanced Credit Protections for Service Members
A recent report released by the Department of Defense (DoD) indicates that revisions to the Military Lending Act (MLA) are “necessary to protect borrowers from continuing and evolving predatory lending practices”. These findings also indicate that the broader protections and definitions of credit must involve a more comprehensive program that goes beyond capping interest rates at 36 percent annual percentage rate on auto title and payday loans. As high as this figure is, unscrupulous lenders have still managed to circumvent the law by offering installment loans and open-ended credit – two products that were not included as part of the original MLA protections and may include useless add-on products that increase the overall loan cost. Rates on these types of loans can legally carry exorbitant high interest rates over 300 percent and terms that require repayment in full within just a short period of time.
The DoD recognizes that simply prohibiting these other high-interest loans under the MLA is not a sufficient measure to deter predatory lenders. In all likelihood, these entities would just introduce another program intended to prey on the military and their families. By selling credit through ‘credit stores’ that operate in close proximity to military bases, high-cost lenders especially target young servicemembers who may have less experience in personal financial management. As such, the DoD acknowledges in its report that additional measures should also encourage members of the military to “choose behaviors that will not hinder their financial future”. It’s important too for service members to draw on the resources available to them at their respective bases, including financial counseling and information about reputable lending practices, credit and budgeting.