Payday loan lenders target military personnelPosted:
If you are one of the brave men and women serving our country in uniform, you face enough dangers. You do not need anyone attempting to take financial advantage of you by capitalizing on the unique challenges of military life.
Unfortunately, you can find many payday loan lenders and other purveyors of short-term, high-interest loans near any military base. Bases are full of young service members with a regular and reliable paycheck fertile ground for lending groups. According to The Wall Street Journal, payday loan organizations target families with service members at twice the rate at which they target civilian families.
The Military Lending Act of 2006 was designed to prevent lenders from taking advantage of military families by capping the effective interest rate at 36%. However, only three credit products were covered: closed-end payday loans for $2,000 or less and with terms of no more than 91 days, closed-end auto title loans with terms of no more than 181 days, and closed-end tax advance loans against a refund.
Lenders quickly found ways around the law by offering products just beyond the coverage terms or offering open-ended loans (lines of credit) that were not addressed at all in the original legislation. Their efforts paid off, literally. During the 2012 fiscal year, defense officials reported 1.8 million financial counseling sessions with service members and around 162,000 extended counseling sessions.
Enforcement of the Lending Legislation
The law was amended in 2013 to give the Consumer Financial Protection Bureau (CFPB) the authority to enforce the Military Lending Act. In December 2014, the CFPB produced a report outlining some of the egregious credit terms that military families were facing along with an empirical analysis of these loans (Deposit Advance Products, or DAP in CFPB parlance). Based on the report data, CFPB estimated that over the twelve-month evaluation period, service members took out over $50 million in DAP, totaling an approximate $5 million in fees. Millions of dollars in DAP were procured at annual percentage rates (APRs) greater than 300%.
Expansion of the Act
President Obama announced in 2014 that the Military Lending Act is being expanded to cover a wider range of products and close the omissions that allow lenders to prey on service members. The previous limitations have been abolished and open-ended loans/lines of credit are now included. (The remaining exclusions are loans secured by real estate and certain purchase-money loans such as auto financing.) Creditors are also banned from requiring service members to submit to an arbitration proceeding to settle disputes.
As of October 3, 2017, credit card accounts are also subject to MLA protections when opened by members of the military.
High-Interest Loans Should Still Be Avoided
High-interest payday and advance loans should be the very last resort there is almost always a better option available. For each branch of the armed forces, including the Coast Guard, there is a non-profit charitable organization, such as the Navy-Marine Corps Relief Society, that can help with urgent financial needs and free financial counseling. In addition, small, interest-free loans (generally $500 or less) may be available without strings attached. Before looking outside for assistance, look within the service family for advice and potential loans.
Even if the new Military Lending Act limits close all the loopholes, lenders will still be offering loans at 36% interest, which is very steep for anyone especially low-paid junior service members. There is also no guarantee that a clever lender will not find some new loophole.
It is good to see the protections of the Military Lending Act expanded, but ultimately, the best form of protection is self-protection. Learn to live within your means and get into the habit of saving for larger purchases. Establish a rainy-day fund for emergencies. With good saving and spending habits, it will not matter what payday loan vendors are offering you won't be interested.
If you are interested in a personal loan, visit our curated list of top lenders.
Originally Posted at: https://www.moneytips.com/more-protection-for-the-military
Information contained on this page is provided by an independent third-party content provider. Frankly and this Site make no warranties or representations in connection therewith. If you are affiliated with this page and would like it removed please contact email@example.com
- A parliamentary committee report is recommending that the United Kingdom government increase oversight of social media platforms like Facebook.Full StoryA parliamentary committee report is recommending that the United Kingdom government increase oversight of social media platforms like Facebook.Full Story
- Businesses and government offices are slowly reopening in Haiti after more than a week of violent demonstrations.Full StoryBusinesses and government offices are slowly reopening in Haiti after more than a week of violent demonstrations.Full Story
- China accuses Washington of trying to block industry development after Pence calls Huawei and other telecom suppliers a security threat.Full StoryChina accuses Washington of trying to block industry development after Pence calls Huawei and other telecom suppliers a security threat.Full Story
- Amazon, which ships millions of packages a year to shopper's doorsteps, wants to be greener.Full StoryAmazon, which ships millions of packages a year to shopper's doorsteps, wants to be greener.Full Story
- China's police ministry says it has investigated 380 online lenders and frozen $1.5 billion in assets in a crackdown on misconduct in the huge but lightly regulated industry.Full StoryChina's police ministry says it has investigated 380 online lenders and frozen $1.5 billion in assets in a crackdown on misconduct in the huge but lightly regulated industry.Full Story
- Berlin is unveiling a new app that will let people use public transport, rental bikes, car-sharing and taxis seamlessly to journey through the German capital.Full StoryBerlin is unveiling a new app that will let people use public transport, rental bikes, car-sharing and taxis seamlessly to journey through the German capital.Full Story
- The Supreme Court on Tuesday is taking up a case involving an Alabama man who developed a way to process undeliverable mail.Full StoryThe Supreme Court on Tuesday is taking up a case involving an Alabama man who developed a way to process undeliverable mail.Full Story
- Britain's Sky News says Honda is to close a car factory in western England with the potential loss of 3,500 jobs.Full StoryBritain's Sky News says Honda is to close a car factory in western England with the potential loss of 3,500 jobs.Full Story
- The European Union says that its reaction will be "swift and adequate" if U.S. authorities conclude that European cars are a threat to national security and should be hit with punitive tariffs.Full StoryThe European Union says that its reaction will be "swift and adequate" if U.S. authorities conclude that European cars are a threat to national security and should be hit with punitive tariffs.Full Story
- Asian markets broadly higher as traders look forward to trade talks between China and US continuing this week.Full StoryAsian markets broadly higher as traders look forward to trade talks between China and US continuing this week.Full Story
Why are so many of us living paycheck to paycheck?
If the economy is so great and unemployment is so low, why do so many Americans live paycheck to paycheck? And why don't we seem to care?
It takes more than 7 years to save up for a down payment
Down payment savings time has increased in most markets.
How to identify tax identity theft
Tax filing season is upon us. Soon you will be filing your paperwork and perhaps receiving a nice check — unless thieves file a return in your name first and falsely claim your refund.
7 tips to budget your holiday spending
The holidays are upon us. For those of us feeling a financial pinch, this can be a time of stress and worry rather than one of happiness and caring.
Student loans are hurting Millennials' net worth
Since student debt draws money away from other savings and investment opportunities, the long-term effect on net worth can be devastating
How to find the best deals for Cyber Monday
What are some of the best ways to take advantage of Cyber Monday?
How to land a holiday job
Are you entering the holiday season short of cash? You may want to consider a seasonal job.
9 holiday shopping tips to help you save money
What brightens up your holiday shopping season? Saving money.
Shopping tips to protect yourself from identity theft this Black Friday
What does Black Friday protection mean to you? Maybe it's helmets and elbow pads as you battle your fellow consumers for doorbuster deals. Maybe it's protecting your space in line.
5 Black Friday shopping tips: How to save online and in-stores
Savvy shoppers save hundreds or even thousands of dollars on this single day.