The Consumer Financial Protection Bureau released a report that shines a light on the fact that loopholes in the Military Lending Act rules are causing servicemembers to incur extra costs.
The report asserts these loopholes enabled companies to offer pricey loans to military families by avoiding the 36% rate cap and other credit protections specific to the military. This cap includes certain credit costs such as interest, application fees, and charges for credit insurance. The rules also bar lenders from assuming account access or a security interest in a vehicle title. In addition, the rules prohibit lenders from requiring servicemembers to submit to arbitration if they happened to become involved in a dispute.
The results of the Bureau’s report were included in a comment filed to support the Department of Defense’s suggestion to expand the reach of the Military Lending Act rules to cover deposit advance products as well as additional types of payday, auto title, and installment loans.
“The current rules under the Military Lending Act are akin to sending a soldier into battle with a flak jacket but no helmet. To give our troops full-cover protection, the rules need to be expanded,â€ said CFPB Director Richard Cordray. “The Department of Defense’s proposed revisions will go a long way toward better shielding our military from high-cost credit products.â€
Read the full report here.