A consumer group and five military advocacy organizations have asked for information from six federal agencies about their enforcement efforts to protect service members and their families from predatory lenders.
The organizations have asked for complaints the agencies have filed in federal court or through administrative proceedings alleging violations of the Military Lending Act. That law, among other things, limits the interest rate to 36 percent on certain loans to service members and their families. The law doesn’t cover retirees and other veterans who have left the military.
The organizations asked the agencies to respond by Dec. 21.
The Military Lending Act was enacted in 2006. It does not give the Defense Department enforcement authority over lenders.
In 2013, another law clarified which agencies are charged with that enforcement: the Federal Trade Commission, Consumer Financial Protection Bureau, National Credit Union Administration, Federal Reserve Board of Governors, Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation. They’re the same agencies charged with enforcing the Truth in Lending Act, which covers all borrowers and went into effect in 1968.
“We write to request information about your agencies’ commitment to enforcing this law and protecting military families from illegal conduct,” stated the letter addressed to those agencies, signed by the Consumer Federation of America; National Military Family Association; Air Force Sergeants Association; Chief Warrant & Warrant Officers Association, U.S. Coast Guard; Commissioned Officers Association of the U.S. Public Health Service; and The Retired Enlisted Association.
The letter also asked for the number of supervisory examinations the agencies have conducted that have required lenders to take corrective action, along with and details on those findings and corrective actions.
The 2006 law gave DoD broad authority to define the types of loans covered, but exempted mortgages or purchase-money loans such as vehicle loans. In its initial implementation of the law in 2007, DoD placed narrow limits on the types of credit covered: payday loans, vehicle title loans and refund anticipation loans.
Consumer advocates criticized those narrow limits and complained that some lenders had “morphed” their products so that they fell outside DoD regulations, which would allow them to continue charging triple-digit interest rates.
In 2015, DoD changed its rules to close the loopholes and to include all loans covered by the Truth in Lending Act. Most of the provisions of the new rule took effect in October 2016, but the rules applying to credit cards didn’t go into effect until this past October.