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Subscribe to RSSLawmakers and the Department of Defense are moving to close loopholes in a 5-year-old law that has otherwise successfully stopped some lenders from fleecing military families with exorbitant interest rates on short-term loans.
The Military Lending Act capped interest rates at 36 percent and banned loans that used bank accounts, vehicles or the paychecks of service members as security. But it also adopted somewhat narrow rules, limiting its coverage to payday loans with terms of 91 days or less and to “closed end” credit with fixed terms, for example.
While many payday loan storefronts vanished in areas around military bases and fewer military families sought financial assistance due to such loans, some abusive practices continued. Some auto-title and Internet payday lenders created “open ended” loan products with no end date and interest that could top 500 percent, according to a May report by the Consumer Federation of America.
Related: Feds move to help out underwater military homeowners
The Senate is now holding hearings on new restrictions for lenders that market to military families. The rules may be included in the 2013 authorization measure that guides military spending.
“I hear from financial counselors on the installations about the prevalence of payday-like products that are specifically marketed to military families – often with patriotic-sounding names and the American flags on the website to match, but with a sky-high interest rate,” Holly Petraeus, who oversees services member affairs at the Consumer Financial Protection Bureau, told the Senate banking committee on Tuesday.
Such abusive lending targeted at military families hits at the heart of the Pentagon’s effort to educate troops about good financial practices because troops with money problems can be distracted on the battlefield or in their other duties.
Watch US military videos on msnbc.com
“Financial readiness of service members and their families is essential to their well-being and their ability to contribute to the mission,” Col. Paul Kantwill, director of the Office of Legal Policy, testified on Tuesday.
While Kantwill reported that the majority of previous abuses have been stamped out, he said the Defense Department is taking a hard look at these other high-cost loans not covered by the regulations and is concerned about some overdraft protection programs as well.
However, the American Financial Services Association, which represents non-bank lenders, fears the stricter regulations will be extended to other groups, such as police officers or firefighters.
“They’ll get a foothold,” Bill Himpler, executive director the trade group, told Bloomberg news service. “If they say it’s good for the military, why is it not good for first responders.”
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They need to stop these lending predators. The people that get trapped are the ones least able to pay 300-500% interest rates.
the payday loan scams , found a loophole in state Usury laws; the Mafia did not even charge this much; they should all be outlawed, Congress get off of your rear end and do something, other than campaign contributions from these thieves. Congress, best money can buy.
The government has already done something ... exactly what you see in this article. And it started when they allowed the credit card companies to ignore state usury laws using the good ol' interstate commerce clause in the Constitution as justification.
The best answer to these roaches is as follows: My son was stationed in Hawaii for over three years in between deployments. There was one slimeball who kept preying on new recruits. A sgt visited him and told him that if he ripped off one more Marine, he would return and destroy his shop. Soon after, he sold some sap boot a laptop that was crap and priced at over 2000$. The sgt. yelled at the boot at length and then took the laptop back to the shop, accompanied by 2 or 3 of his comrades. He screamed at the guy for a bit and then used the laptop as a club and smashed up half of his shop, left the laptop and warned the guy on the way out that his next visit would be really ugly. The guy avoided Marines after that. I guess it was illegal but very effective and well-deserved. I laugh at that every time I think of it.
There needs to be some usury laws in this country. And if there already are, they need to be enforced.
They need to put these snake in the grass predatory lenders out of business period. Its bad enough that the Government lets illegals and other criminals prey upon us but these snakes should be put out of business and/or shot
STATE LAW MAKERS, have a great " PERSONAL INTEREST " in Payday Loan Companies, because they're (part owners or own stocks) in these compainies ! ITS A FACT !
While I don't necessarily disagree, POST A SOURCE VALIDATING your claim. Or it's just that much innuendo from uninformed people.
Pay the soldiers/sailors/airman/marines what they are worth and maybe they wouldn't need these types of loans. They put their lives on the line for lousy pay. Give them an increase!
Retired... First, thanks for your service.
And I agree, we need to pay our Armed Forces more. I find it appaling that young married enlisted personnel need to receive FOOD STAMPS in order to feed their families.
Yes, I know they receive great benefits the general population doesn't. Respectable health care for themselves and their families, in some facilities, decent housing, or subsidized off base housing, PX privileges (although PX prices aren't that impressive any more... a lot different than when I did my 2 years in 69-71), but none of that negates the need for higher basic pay. And much greater combat pay. Give the guys fighting the fight the big bucks and the REMF peanuts while they take the credit.
In addition, base and post commanders need to be far more proactive, working with their JAGs they can formally place such predatory businesses on official off-limits lists, thus prohibiting service members from using such businesses and effectively shutting down businesses that pose a clear risk to unit and personnel readiness. A little old-fashioned "barracks justice" in the most egregious of cases wouldn't hurt as well.
Barack Osama is still alive in an underground base underneath the pentagon having sex with george bush
If the DoD would start to raise the ASVAB testing scores for entrance into the services, then maybe we would start to populate the services with more astute young service members who can better manage their finances and who are less prone to falling for these confidence loan schemes. Moreover, young service members need more knowledgeable NCOs, who in turn can provide better mentorship to their wards in financial matters susceptible to predatory lenders.
The worst of these thieves is Omni Military Loans. They try to make you believe that their owner is former military but he is not. Their executives are all lying, dirty snakes. Their headquarters are in New York but they operate out of Nevada. My husband got screwed by these guys...one of their so called VPs sold my husband a bill of goods and now we are talking to a lawyer. Don't trust these snakes!!!
Abduct a few of those lender snakes to Gitmo, waterboard them, then turn them loose after 6 months.
" If the DoD would start to raise the ASVAB testing scores for entrance into the services, then maybe we would start to populate the services with more astute young service members who can better manage their finances and who are less prone to falling for these confidence loan schemes."
Blame the victims, huh? Classy. These aren't people that went and racked up a bunch of credit on TVs and rims and junk. They were simply trying to get a house (in many cases for the first time) and are being preyed upon by these vultures.
Why not for all families? Is there something so special about vets that only they deserve fair treatment from big-time political contributors while all other Americans deserve to get scalped?
So many comments promoting usury laws and the evils of payday lenders. Sure, these companies exist, but they are just pikers compared to Banks and Credit Card companies. Try calculating the apr on a $35.00 overdraft fee on a $3.00 overdraft. When you are done with the "basics" start adding in the extended overdraft fees, (for not clearing out the overdraft in a "timely" manner) then couple that with the predatory manner in which banks "clear" your checks, (largest to smallest) which maximizes the individual fees. Compound that with the "overdraft protection" programs let the banks control which checks to return, and charge on a per item basis and you have a recipe for gouging on a world class scale. It's kind of like comparing snidely whiplash to bernie madoff. The payday lenders are for the most part little guys that you can see coming....the fee driven banks and credit cards pretend to be the good guys, but their hidden costs and manipulative processes are on an entirely different level. You might lose a couple hundred to a pay day lender, but a bank can take you for thousands.