According to military news sources, the Military Lending Act, which was first passed in 2006, will see expansions aimed at protecting service members and military families. The expansion of regulations were created due to the fact that financial institutions were using loopholes in the Military Service Act to continue charging triple digit interest rates which put military families and service members deep in debt.
According to the Wall Street Journal, "The original Military Lending Act was created to address the issue, and set the 36% interest cap. But lending institutions quickly found that there were ways around the law by offering lines of credit or other loan products that skirted the legislation. For example, if a loan exceeded $2,000 or if the term was more than 91 days, those loans didn't fall under the lending law."
A few months ago, according to military news blog BuiltUSA, "House Republicans partnered with banking industry lobbyists in an effort to stall new protections for U.S. troops against predatory lenders. That effort, in which GOP lawmakers wanted to add a provision to the military spending bill that would delay implementing the new rules for at least a year, failed."
Now it looks as if lawmakers in Washington agree that it is time to expand lending act to further protect our military from predatory lending practices.
So what changes will be made to help offer further protection to our military service members and their families when it comes to lending and credit? First, there is a redefining of loans and loan products which fall under the Military Lending Act. Some of the loans now included involve short-term loans with smaller amounts lended - think payday loans and vehicle title loans.
Those types of loans, along with other lending products like rolling lines of credit, will now all be capped at a 36% interest rate. Besides the new caps of 36% on products lenders were creating as loopholes to the military lending law, there are also further protections for military families and service members. Those protections involve preventing creditors from requiring military customers from submitting to mandatory arbitration and burdensome legal proceedings.
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