The Military Lending Act is intended to protect our military from being preyed on by unscrupulous short-term lenders.
Seven years later the government is finding there are huge loopholes in the Act. Loopholes that do not cover some short-term loans, certain installment loans and rent-to-own, some auto title loans and pay day loans. Debts which the Act was designed to limit.
According to Dealbook, NY Times, the Military Lending Act has some serious loopholes (11/22/13)
The Military Lending Act is supposed to protect our military from being preyed on by unscrupulous short-term lenders. Here is a summary of what the Act is designed to do. Lenders covered by the Act are prohibited from issuing rollover loans to pay off any prior loan, unless the new loan has more favorable terms than the prior loan.
Lenders who specialize in ripping off military personnel have official sounding names like Military Financial, Just Military Loans, and Patriot Loans.
Think about the information you are giving this stranger: all your financial information, your children’s names, bank accounts and your social security number. You do this without the slightest guarantee that the information will be kept safe.
In 2006 Congress the Military Lending Act which was intended to protect servicemen and women from the loans tied to a borrower’s next paycheck.
These loans carry double-digit or triple-digit interest rates and force the borrower into a never ending debt cycle. Seven years later the government is finding that there are huge loopholes in the Act. Loopholes that do not cover some short-term loans, certain installment loans and rent-to-own, some auto title loans and pay day loans. Debts which the Act was designed to limit.
According to the New York Times’ article “Lenders who specialize in ripping off military personnel have official sounding names like Military Financial, Just Military Loans, and Patriot Loans.
They like lending to the military because they get paid from the military allotment, which virtually assures payment. Moreover, soldiers have to stay in good financial shape in order to maintain their security clearance, which means lenders have maximum leverage over their borrowers. One lenders web site claims “We know the military because we are former military,” Lenders also lure customers by offering $25 Starbucks gift cards for referrals and throw parties with free food.”
There are serious repercussions to violations of the Act.
Such as, the contract is void. Lenders who intentionally violate the Act can be charged with a criminal offense for which they may be fined and imprisoned for up to a year. Lenders may also be held liable for money damages caused by their misconduct, punitive damages, and court costs and attorney fees. the problem is that the lenders twist the law to serve their own greedy purposes. The contract states that the law of another state controls, usually choosing a state that has very weak enforcement policies.
Finally the Senate Commerce Committee has convened a hearing on abusive military lending.
I wish that Congress cared as much for the non-military citizen, but we have to start somewhere. Now don’t get mad, I am married to a jarhead, who happens to be disabled. I have a great deal of respect for our military and am very aware of the sacrifices they make to protect us all. I make my earlier statement because I believe what is wrong for one group is wrong everyone. That these unscrupulous lenders should not be allowed to prey on anyone, military, low income, elderly or otherwise.
What do you think?