A law designed to help protect soldiers and military families from predatory lenders may actually be allowing them to be taken advantage of, a new government report found.
The Consumer Financial Protection Bureau released a report Monday that found loopholes in the Military Lending Act that have allowed some companies to offer high-cost loans to military families — the opposite of the law’s intent.
Congress passed the Military Lending Act in 2006 to help protect active-duty military personnel from predatory lending practices and gave CFPB oversight of enforcing the law in 2013.
The report found that there are “a number of ways that consumer credit products can be structured to fall outside of the scope of the Military Lending Act, as it is currently implemented.” CFPB found that lenders took advantage of military families through high interest rates, participation fees and other add-on products.These include issues with open-ended lines of credit, a contract for an initial duration of greater than 91 days for payday loans or 181 days for auto title loans, and offers to finance an initial amount of more than $2,000 for payday loans.
The new report was released as the Defense Department is pushing to broaden the scope of the Military Lending Act, The Hill reported.
“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,” said CFPB Director Richard Cordray in a statement obtained by The Hill.
“The Department of Defense’s proposed revisions will go a long way toward better shielding our military from high-cost credit products.”
