Goodbye to Military Lending Act Loopholes


How long will we be seeing signs like this in our communities?  Cash store smallerI refer specifically to the little sign in the store “Military Welcome,” which arises from sneaky loopholes that have been used for years to get around Military Lending Act (the “Act” or the MLA”), a bipartisan law passed by the House and Senate and signed into law by President George W. Bush as a part of the 2007 National Defense Authorization Act.  The law recognized that payday and other high cost loans interfere with military readiness and as a result, passed a rather uncontroversial 36 percent military APR, including all costs and fees. 36% period. End of story.

But we know it wasn’t true and as always they found their way around it, circumventing the definitions, increasing the terms, so on and so on. Last week, the Department of Defense released proposed rules to close the loopholes, thank goodness, given that no one opposed the MLA. The spruced up law still does not cover any transaction that is not covered by the Truth in Lending Act, meaning that big overdraft fees and rent-to own are still problems for Military personnel.  Also, the scope of the Act is still limited, so the Act still does not cover expensive auto purchase loans, mortgages, or purchase money goods, which can still cause hardship for Military families. Still, this is a big improvement in a situation that has circumvented the full supported MLA for a very long time. This DOD press release contains most of the details. Very nice.