There has been a lot said and written about the way that some companies prey on military families, using deceptive or dishonest loans and financial enticements. From money deals to out and out loan sharks, there are a lot of individuals and companies that attempt to prey on Servicemembers and their dependents.
Well, there are also new protections that are coming into effect. The new legislation, called the Military Lending Act, promises to address many of these questions and solve some of the problems that face both Servicemembers and their families. Borrowers are lured with the promise of easy money into high cost, high fee loans, often with a hidden catch. Such things as balloon payments that are not clear can really make things difficult for the Servicemember and their families. Such actions weaken the over all military readiness of our armed forces, and threaten individuals and their military careers.
One frequent type of scam can be the payday loan system. Sometimes the interest rate that is charged the loan holder is as much as 800 percent. And this is obscured because the rate is hidden in the length of time for the repayment, usually 7-21 days. “Sometimes our military personnel get deep into debt over their heads,” said Dr. David Chu. Dr. Chu is the Undersecretary for Personnel and Readiness for the Department of Defense.
The legislation featured in the Military Lending Act fights illegal lending practices and is specifically targeted at Servicemember dependents, Servicemember spouse, and Servicemembers themselves. The Department of Defense is working closely with Congress to issue new guidelines to help military Servicemembers to know the protections and their rights under the new law. The new law became effective in October of 2007. There are three specific types of financial dealings mentioned in the new law:
-Vehicle Title Advance Loans.
-Tax Refund Anticipation Advance Loans.
-Payday Advance Loans.
For all three types of loans, the new rule is that there cannot be more than a 36 percent annual interest rate charged for any of these loans to a Military Armed forces member. The new law prohibits the lender from keeping a Servicemember personal check or electronic access to a Servicemember account to make sure they repay a loan.
Both Congress and the Department of Defense are monitoring the progress that the new law has on Servicemembers and their families. Both groups are committed to working together to eliminate predatory lending and practices that prey on Military families, and will adjust and amend the law should they find other actions are necessary.