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New Military Lending Act rules will protect troops from predatory lending

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(SAN FRANCISCO, CA) – Today, Consumer Action applauded the Department of Defense for issuing new proposed rules to protect servicemembers and their families from predatory lending practices. The new rules update implementation of the Military Lending Act, bipartisan legislation passed by Congress and signed into law by President George W. Bush, to close loopholes predatory lenders have used to prey on members of the armed services.

“Exploitation, in any form, of the very people who protect our country is clearly wrong. The military has rightly identified protecting members of the armed services and their families from abusive lending practices as vital to military readiness,” said Linda Sherry of Consumer Action. “The rules announced today would ensure that servicemembers would be further protected from high-cost credit. The fewer people trapped in a cycle of debt, the better.”

The Military Lending Act limited loans to members of the military to a 36% annual percentage interest rate. Predatory lenders have used loopholes and created new, sky-high interest rate loan products to circumvent the narrow definitions the Department of Defense used in its original regulations implementing the law. Often marketed as a quick fix to a cash crunch, the defective and predatory loans currently targeting members of the military are designed to trap them in a cycle of debt they cannot escape. Many lenders charge effective interest rates over 400% when factoring in exorbitant fees and worthless insurance products often sold with loans.

Consumer Action, a strong advocate of reforms to protect consumers and their families, opposes predatory lending practices.

Click here for the Department of Defense press release.

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Consumer Action empowers low- and moderate-income and limited-English-speaking consumers nationwide to financially prosper through education and advocacy.

 
 

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