Aiming to restrict lenders who prey on members of the military, the Obama administration on Friday moved to close legal loopholes that have placed hundreds of thousands of service members at risk of excessive payday and other short-term loan fees, the Associated Press reported. The Defense Department proposed new rules to toughen a 2006 law that limits interest rates for certain types of credit available to service members and their dependents. Under current law, lenders cannot charge members of the military more than 36 percent interest. But the loans covered by the law are so narrowly defined that lenders, many of them located near military bases, can make simple adjustments to get around its provisions. The proposed rules would broaden the definition of consumer credit so that more loans would fall under the provisions of the 2006 law. Final rules likely won't take effect until next year; the public and interest groups have 60 days to comment on the plan. Currently, transactions covered by the 36 percent cap on interest are limited to payday loans of $2,000 or less with terms of no more than 91 days, loans that are secured by a personal vehicle with terms of no more than 181 days, and tax refund anticipation loans. But the Consumer Financial Protection Bureau and the Pentagon have found that in some cases lenders slightly altered the loans, adding $1 to the loan or one day to the terms to bypass the interest cap.
For more on financial protections under the Servicemember Civil Relief Act, be sure to pick up a copy of ABI’s Bankruptcy and Debt under the Servicemembers Civil Relief Act from the ABI Bookstore.
http://bookstore.abi.org/bankruptcy-and-debt-under-servicemembers-civil…