The Virginia Poverty Law Center along with the Virginia Partnership to Encourage Responsible Lending coalition applauded the Department of Defense for issuing new proposed rules to protect service members and their families from predatory lending practices.
The new rules update implementation of the Military Lending Act (MLA), bipartisan legislation passed by Congress and signed into law by President George W. Bush, to close loopholes predatory lenders have used to prey on members of the armed services. In Virginia, open-end lines of credit by former payday lenders can skirt the current restrictions under the MLA.
“The military has rightly identified protecting members of the armed services and their families from abusive lending practices as vital to military readiness,” Jay Speer, Executive Director of the Virginia Poverty Law Center said. “Exploitation, in any form, of the very people who protect our country is clearly wrong. We believe the rules announced today will crack down on predatory practices and strengthen our community as a whole. The fewer people trapped in a cycle of debt, the better.”
The Military Lending Act limited loans to members of the military to a 36% annual percentage interest rate. Predatory lenders have used loopholes and created new, sky-high interest rate loan products to circumvent the narrow definitions the Department of Defense used in its original regulations implementing the law. Often marketed as a quick fix to a cash crunch, the defective and predatory loans currently targeting members of the military are designed to trap them in a cycle of debt they cannot escape. Many lenders charge effective interest rates over 400% when factoring in exorbitant fees and worthless insurance products often sold with loans.
“The last few years have shown that predatory lenders are, unfortunately, innovative, and they often have friends in high places,” Ward Scull, III, Co-Founder of Virginians Against Payday Loans said. “Today’s new rules are a mark of the Department of Defense’s true commitment to doing what is in the best interest of service members and their families.”
VPLC, as part of the VaPERL Coalition, opposes predatory lending practices and have been a strong advocate of reforms to protect consumers and their families.