Weakened Military Lending Act Could Leave Service Members Unprotected

The Military Lending Act (MLA) was passed into law in 2006 to protect military servicemen and women from shady lending practices. This is because, unfortunately, greedy fraudulent lenders come from all directions to use abusive tactics to take advantage of this particular population and their families.

An Explanation For Why MLA is Necessary

Paul Kantwill, a retired Army Col. who recently left his position with the Consumer Financial Protection Bureau (CFPB), told NPR that predatory lending was a huge problem in the 90s, prior to the MLA. He remembers seeing "21 high-cost lenders and vehicle title-loan businesses just outside the main gate at Fort Campbell, Ky." Struggles with debt is especially hard on military service members. It can greatly affect military readiness due to the distraction of worrying about the debt and its effect on their family. It weakens security clearances, and it can even lead to members being kicked out of the military.

Protections of the MLA

Under this law, the CFPB is supposed to oversee the lenders through regular checks to catch anyone trying to rip off active military members by imposing a finance charge of more than 36%, which is the Military Annual Percentage Rate. This law also protects military consumers from abusive procedures that would make them wrongfully liable to lenders.

Under the current MLA law, creditors:

• Cannot impose a loan interest rate above 36%
• Cannot use consumer information to determine if a service member is a covered borrower without their consent
• Must be upfront with written and oral disclosures on top of what is already required by the Truth in Lending Act
• Cannot impose abusive loan terms: penalties, mandatory arbitration, notices, etc.
• Must follow strict rules on refinancing, renewals, and rollovers.

Recently, however, this protection provided by the MLA has come under threat by the Trump administration through his acting director of CFPB, Mick Mulvaney. Critics fear that this important act is actually being manipulated to favor lenders over the military. These new rules will make it easier for those in the service to be preyed upon by unchecked companies fraudulently selling over-priced products and protections.

There is also serious concern from critics and military members that the CFPB is loosening protections for the MLA by ending their supervision of lenders, and that enforcement could be weakened because the lenders will not be penalized until after a complaint is received.

One Questionable Practice To Beware Of

When buying a car, it is important to beware of gap insurance, which can actually be a useful financial product, and it can be purchased for as little as $20-$30 annually, according to Christopher Peterson, a University of Utah law professor. It's available to anyone. But the auto industry wants to make it sound as though service members are being deprived of this type of vehicle protection if dealerships aren't allowed to offer it. This is simply not true. What is true is that the auto industry is actually charging a hefty price for the gap insurance by marking it up almost 5,000%. That means that even though any consumer could get it for $30 via your auto insurance or a third party , the "concerned" auto industry wants to allow dealerships to push our valuable military members into thinking they need to purchase the insurance for $1,500. This is something the auto lobbyists have wanted to allow on top of other add-on products that they can try to roll into an auto loan.

If you are an active-duty military service member, you deserve full protection under the Military Lending Act. If you have encountered any problems with a lender, you have a right to put them in their place and get your life back. Contact a qualified and determined bankruptcy lawyer to stand up against these shameless predatory lenders.

https://www.fdic.gov/regulations/compliance/manual/5/v-13.1.pdf
https://www.npr.org/2018/08/13/637992389/white-house-takes-aim-at-financial-protections-for-military
https://www.vox.com/policy-and-politics/2018/8/14/17684810/military-lending-act-mick-mulvaney-cfpb-loans