U.S. PIRG Consumer Blog: Military lending protections expected to become law

We expect that PIRG-backed legislation to ban predatory lending to military personnel and their families by placing a hard 36% APR interest rate and fees cap on loans to them will pass the House and Senate today or tomorrow. A strong version of the amendment by Senators Jim Talent (R-MO)and Bill Nelson (D-FL) and Rep. Sam Graves (R-MO) is part of the 2007 Defense Authorization bill, H.R. 5122, and all other squabbling over other parts of the bill is apparently over. Highlights from colleagues at Consumer Federation of America: MORE:

Interest Rate Cap. Prohibits any lender from imposing an annual percentage rate of interest of more than 36 percent on loans to members of the armed forces stationed anywhere in the world or their dependents. Interest is defined to include all extra charges and fees of any kind, including the sale of related products like credit insurance. This requirement complements existing federal law, which requires lenders to lower interest rates to six percent on loans that Service members open before they enlist.

No Check Holding or Electronic Access to Bank Accounts. Prohibits lenders from basing loans to Service members on the writing of checks without adequate funds in the bank to cover the check, or on electronic account access or wage allotments that allow lenders priority access to bank accounts or military pay. Loans secured by title to the Service member’s vehicle are also prohibited.

Legal Protections. Prohibits lenders from requiring Service members to agree to mandatory arbitration in the event of a dispute or to waive their legal right to recourse in the courts.

The significance of this bi-partisan victory cannot be over-stated.