Proposed Regulations Would Expand Financial Protection for Military Families

The Department of Defense is proposing changes to regulations that would close loopholes in the Military Lending Act (MLA) and help protect thousands of service members across the country.

The proposed rule change would amend existing regulations in the MLA, including extending a 36 percent interest rate cap on short-term loans on a wide range of credit that has become available since the law was passed by Congress seven years ago.

Previously, the 36-percent cap was only implemented for payday and auto titles loans, as well as tax refund anticipation loans.

But lenders have exposed some loopholes in the law, leaving service members vulnerable to predatory loans. For example, creditors could avoid restrictions simply by offering longer loans or more expensive loans not covered under the previous act.

The DoD’s proposed measures would work toward reducing predatory lending practices, and protecting military families from high-cost loans tied to their paychecks, which could lead to excessive debt.

In addition to the cap, creditors could be required to provide additional disclosures, like encouraging the borrower to seek out options that are not high-cost credit.

The rules are expected to go into effect next year.

“There were loopholes so large that you could drive a truck through them,” Michael S. Archer, director of military legal assistance for the Marine Corps Installations East, told the New York Times.