Military Predatory Lending Warnings and CFPB Orders Refunds
Attorney Generals from 13 states have written an open letter to Secretary of Defense (SecDef) Chuck Hagel, requesting more robust protections for service members exposed to predatory consumer lending practices. The letter states: “Our military service members are disproportionately targeted by predatory lenders. Military bases are surrounded by storefront predatory lenders, many of which charge triple-digit annual [interest] rates.”
FRA strongly supported provision in the FY 2007 National Defense Authorization Act known as the Military Lending Act (MLA). Although the law was broad, the DoD regulation implementing the Act was limited in the types of consumer credit covered. The letter from the State Attorney Generals states that “While the MLA has been largely successful in curbing abusive lending in categories covered by the Department’s current rules, the narrow categories and definitions create large loopholes that permit lenders to fashion abusive or predatory transaction that avoid MLA’s protections.” The letter further requests that SecDef broaden the current regulation’s definition of covered consumer credit to provide comprehensive protections against abusive lending practices and that it be done expeditiously.
In related news the Consumer Financial Protection Bureau (CFPB) ordered U.S. Bank and Dealers’ Financial Services (DFS) to end deceptive marketing and lending practices targeting active-duty military members. The two companies must refund $6.5 million to service members for failing to properly disclose all the fees charged to troops who used the companies’ Military Installment Loans and Educational Services (MILES) auto loans program, and for misrepresenting the true cost and coverage of add-on products financed along with the auto loans. The companies are also faulted for the process associated with payments for cars bought through MILES via military allotment.