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April 12, 2007
Groups criticize proposed military lending regs
Today, the Consumer Federation of America, Center for Responsible Lending and the National Consumer Law Center issued a joint statement expressing concern that the Pentagon's proposed regulations implementing the tough 2006 Military Lending Law are too weak and ignore Congressional intent to ban all usurious loans: We have frequently commended the Department of Defense for concluding that payday and other high-cost loans are harmful and abusive, and support the Pentagon’s commitment to protecting its military families from financial exploitation. However, the regulations they have proposed in attempting to carry out the landmark Military Lending Act include loopholes that will allow payday and other predatory lenders to tweak their products and continue trapping borrowers into high-cost loans. The proposed regulations also inexplicably exempt some highcost loans that have been criticized by the Pentagon and are covered under the law, such as military installment loans. Please file comments by 11 June 2007. This regulation won't do the job of protecting our military men and women from loan sharks and won't ensure our military preparedness. Here's more from CFA, CRL and NCLC on the high-cost loans that would slip through inexplicable loopholes in the regulation:
These loans would be allowed under the Department of Defense’s proposed regulations:
Advance America offered an open-end loan in Pennsylvania that included a $149 monthly “participation fee” plus a nominal interest of 6 percent. The effective annual interest on a $500 loan is 364 percent. This would be permitted under the proposed rules.
Most payday lenders in Illinois now structure their triple-digit interest loans with terms that exceed the 120-day definition of Illinois law. This would be permitted under the proposed rules.
A sailor reported getting a subprime credit card from a South Dakota bank that imposed $294.60 in fees for $84.85 in purchases after just two months. This open-end credit card cost over 2,000 percent interest. This would be permitted under the proposed rules.
First Bank of Delaware offers 350 percent internet installment loans through PurposeLoans.com. These loans could be offered to Service Members if the payment period is extended from 6 to 13 weeks under the proposed rules.
In asking Congress for action last fall, Admiral Charles Abbot, director of the Navy-Marine Corp Relief Society, testified before the Senate Banking Committee that an installment loan from a California company cost a Service member $30,000 to repay $5,000 over a ten year period.
Posted by Ed Mierzwinski at April 12, 2007 01:10 PM
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