Predatory Lenders Get Around The Military Lending Act
Although Congress banned payday loan companies from charging excessive (and usurious) interest rates to members of the military, bases around the U.S. are still surrounded by storefront lenders charging high annual percentage rates, sometimes exceeding 400 percent. The Military Lending Act, passed in 2006, was designed to protect service members and their families from predatory lenders—but the law defined the types of covered loans so narrowly that it’s easy for lenders to get around it.”We have to revisit this,” said Sen. Dick Durbin, D-Ill., who chairs the defense appropriations subcommittee. “If we’re serious about protecting military families from exploitation, this law has to be a lot tighter.” If they fall into debt, service members can lose their security clearances; so they often keep their financial troubles from their superior officers and resort to complicated, deceptive high-cost loans. In response to this growing trend, the Department of Defense has started a process to review the Military Lending Act.The law covers two products—payday loans, usually two-week loans with annual percentage rates often above 400 percent, and auto-title loans, typically one-month loans with rates above 100 percent and secured by the borrower’s vehicle—but there are many more high-cost lending products, all aggressively advertised around military bases. In one troubling case, a 37-year-old staff sergeant in the Marines signed over the title to his 1998 Ford SUV and a copy of his keys, in exchange for $1,600 from Smart Choice (a storefront lender). The terms of this loan demand he pay $17,228 over two and a half years—this is an interest rate of 400 percent. The sergeant fell behind for a few months, and his car was seized and sold at auction.Annual interest are absurdly, abusively high with storefront lenders; a five-month loan for $400 at Ace Cash Express comes with an annual rate of 585 percent. Not surprisingly, payday loan industry representatives (when they do respond to requests for comments) say that more options in the storefront lending business is good for consumers—in other words, they offer a multitude of ways to financially screw people.If a collection agency has harassed you, you may be entitled to money damages up to $1,000.00, based on the FDCPA, which has been around for almost 35 years. The FDCPA is a federal law that applies to every state. In other words, everyone is protected by the FDCPA. The FDCPA is essentially a laundry list of what debt collectors can and cannot do while collecting a debt, as well as things debt collectors must do while collecting a debt. Plus, the FDCPA has a fee-shift provision. This means, the collection agency pays your attorney’s fees and costs. Founding attorney, Michael Agruss, has settled over 1,500 debt collection harassment cases. We want to help you, too.