The Consumer Financial Protection Bureau (CFPB) issued a report in December, asking for stronger protections for military families. Earlier this year, NBC News reported that military families are “especially vulnerable.”
Predatory lending practices affect a large number of Americans, and currently in the U.S. house there’s an important debate about just how far these protections will go. According to The Huffington Post, Congress passed legislation in 2006 that set a 36 percent cap on interest rates for auto title loans, tax refund loans, and payday loans for military families.
In response, Lenders aptly adjusted the loan terms to avoid these limits. These terms applied to payday loans that were for 91 days or less, and the amount of $2,000 or less. For payday loans exceeding 92 days or $2,001, credit companies were still able to avoid the new rules. Larger banks skirted around the issue by creatively issuing “deposit advance products,” which operated very much like payday loans, but annual interest rates of 300%. In 2012, Congress passed another law to close these loopholes. As of September 2014, these new rules have been finalized.
Unfortunately, the problem was not completely solved because a provision was added to the military spending bill to delay the adding of any new protections for another year. Josh Earnest, White House Press Secretary termed the proposal as “shameful” and Iraq War veteran, Rep. Tammy Duckworth (D-Ill.), has led the opposition against the Republican measure.
According to the Military Times, the delay was successfully stopped by Democrats. A narrow vote among House lawmakers removed the contentious language delaying the new rules, a great relief to advocates who viewed the clause as an attempt to take away military family financial protections.
Members of the House Armed Services Committee voted 32 to 30 to strip provisions from the legislation that would have setback Defense Department plans for expanding the 2006 Military Lending Act.
Those opposing of the clause accused supporters of providing predatory lenders with more chances to oppress troops. They also feel these rules are long overdue. Banks will be displeased but Democrats, consumer advocates, and other military advocacy groups see the vote as positive news.
“Service members who are drowning in debt are a burden to the military. They are costly to manage because they need special attention. Beyond that, thousands of service men and women have already been barred from duty abroad because the debt they carried made them security risks. In other words, blocking better debt protections is a terrible idea,” said journalist and author, Brent Staples.
For now, the current crisis has been averted.
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Source: http://www.msnbc.com/rachel-maddow-show/house-targets-predatory-lending-protections-us-troops
