U.S. PIRG Consumer Blog: File predatory lending comments to Pentagon by Monday

The end of the day this Monday, 5 February, is the deadline for filing comments to the Pentagon in support of the new Military Lending Act. It's the most important pro-consumer law enacted by the Congress in years. Its foes -- from the banks to the predatory lenders -- are lining up their lobbyists in Armani and Gucci-clad ranks to convince either regulators or Congress to weaken the new protections that apply to the camouflage-clad ranks [along with their families back on base] that we're sending to Afghanistan and Iraq to protect us.

The Military Lending Act protects active duty servicemembers and their families from abusive credit practices. It was passed with support of an unprecedented coalition of military family support groups, consumer advocates and the Pentagon itself, aligned because crippling, punitive predatory loans imposed on low-paid soldiers and sailors were hurting the nation's military preparedness.

The new Military Lending Act caps interest rates at 36% annual interest including extra fees and insurance premiums. It also prohibits securing loans with personal checks (payday loans), or through electronic access to the Service member's bank account, mandatory allotments, or car titles. Procedural rights are safeguarded through its ban on mandatory arbitration clauses, waiver of rights, and other burdensome requirements. You can comment at the Federal eRulemaking Portal. Follow the somewhat clunky instructions for submitting comments. Comments are posted to the public, so be careful about personal information. Include the agency name (Department of Defense) and docket number: DOD-2006-0S-0216; FR Doc. 06-9518. What should you say? Here are some ideas:

1. Congratulate the Department of Defense on its thorough report to Congress (large pdf) on the impact of predatory lending on Service members and their families. Urge quick implementation, by 1 October 07.

2. Urge DOD to automatically provide coverage to servicemembers. Tell personal stories. By far, that's my most important advice. If you've been victimized by predatory practices--explain how it worked and how it hurt you and your family.

3. List the protections in the Military Lending Act that are important to you: The 36% interest rate cap (usury ceiling) that includes all costs of borrowing in its definition, the ban on soliciting unfunded checks as security for a loan, the protections against unfettered access by collectors to bank accounts or military pay, and the civil justice protections.

4. Urge DOD to deliver on the promises of the new law by applying it to all types of lenders, especially including banks, and to all types of loans, especially including all open-end credit (e.g., credit cards) as well as bounced check overdraft "protection" loans. These are a source of inordinate predatory profit for the nation's well-heeled banks [and, think about it, are such a deal, since you can avoid those shabby payday lending storefronts. Your bank will gouge you just the same right there on your monthly statement or at its well-appointed branch office.]

These are significant protections that will eventually -- if we work hard -- be extended to all Americans. For now, however, we must simply work hard to make sure that the banks are included and that rules aren't gutted. The banks are trying to create the false inference that the only problem the new law was intended to address was payday lending, not unfair bank and credit card practices. Wrong. Their record profits have been largely fueled by their virtually unregulated and growing use of predatory practices, from credit card tricks to bounce protection loans. They, along with the full-time predatory lenders, have many friends on Capitol Hill. The banks also have many friends at the Federal Reserve and the OCC (the obscure, but arrogant chief regulator of national banks). These bureaucrats are upset that the Military Lending Act passed through the Congressional military committees, not the banking committees, and that the Pentagon, not them, was given lead rulemaking auuthority, and have been whining ever since at their lack of control of the process. [They're not left out, they're just down a ways on the chain of command structure.]

By the way, we call it the Military Lending Act, for short, or the Sens. Jim Talent (R-MO)-Bill Nelson (D-FL) amendment to the John Warner National Defense Authorization Act for Fiscal Year 2007, in Congressional longhand.