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Military Lending Act amendments ensure better protections for armed forces members

Jean Ann Fox

Jean Ann Fox

Recent amendments to the Military Lending Act of the 2007 National Defense Authorization Act will provide better protection to armed service members using high-cost credit products like payday loans.

The MLA caps loan rates at 36 percent for service members and prevents lenders from securing a loan with a debit authorization, car title, allotment of military wages or personal check. A 2012 report from the Consumer Federation of America found that some lenders used a loophole in the MLA to offer some loans prohibited by the Defense Department.

New changes to the MLA allow the CFPB and FTC to enforce the 36 percent rate cap and other loan protections for service members. The Department of Defense will be required to conduct a study of abusive credit products used frequently by members of the armed forces within the next year.

Additionally, the DoD will be required to review the effectiveness of existing MLA rules every two years and determine whether new rules are necessary to protect service members from abusive practices and products.

“These amendments are a positive step forward and will ensure that financial protections for service members…are adequately enforced,” Jean Ann Fox, a senior advisor for financial services at the Consumer Federation of America, said. “We look forward to working with the Department of Defense as it review and regulates credit options available to service members to ensure that the financial protections envisioned by Congress are fairly and evenly applied.”

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