Friday, September 28, 2007

New Rule Limits ‘Predatory’ Loans to Servicemembers

"By Sgt. Sara Wood,
USA American Forces Press Service
WASHINGTON, Sept. 28, 2007 – The Defense Department is instituting new protections that will help defend servicemembers against high-interest emergency loans that can lead to a dangerous cycle of debt. A new regulation included in the 2007 National Defense Authorization Act limits the annual percentage rate on payday loans, vehicle title loans and tax refund anticipation loans to 36 percent for active-duty servicemembers and their families.
The change takes effect Oct. 1. This is a big change, as the interest rates on these “predatory” loans can run as high as several hundred percent, said David S.C. Chu, undersecretary of defense for personnel and readiness. Troops and their families have often fallen victim to these loans when they come up short between paychecks, and they can lead to serious problems, he said. “It’s a big problem for commanders, because what happens is often these households get themselves in over their heads,” Chu said. “They’re $200 short between now and next payday, but they’re no better off when payday comes, so they need a bigger loan, and it just goes downhill from there.”
The 36 percent limit in the regulation includes all fees and charges, and the rule prohibits contracts requiring the use of a check or access to a bank account, mandatory arbitration and unreasonable legal notice, Chu said. The regulation makes it a criminal offense for lenders to knowingly charge a higher interest rate to servicemembers, so it is essential that military members be honest about their status when applying for loans, he said. "
More... DefenseLink News Article: New Rule Limits ‘Predatory’ Loans to Servicemembers:

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