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The Source: New DoD Rules Hope To Better Protect Service Members From Predatory Lenders

Flickr user Rambergmediaimages

Last week the Obama administration announcedthat the Department of Defense (DoD) would be increasing protectionsfor service members from predatory loans.

Military members have long been targets for payday and predatory lenders. For this reason Congress passed the Military Lending Act (MLA) in 2006 that capped percentage rates at 36 percent on payday and auto title loans, and didn't allow the loans to be automatically renewed for military service members. 

These protections proved difficult as payday, auto title, and other predatory lenders were changing terms and other aspects of loans to avoid the MLA's clamp down.

According to a recent studyfor Congress the DoD stated:

However, specific definitions of problematic credit no longer appear to function well in  the current marketplace. 

For instance the old language in the act limited the percentage rate on loans under $2000 and loans 91 days or fewer, so many payday lenders restructured offerings to longer than 91 days, or making them "lines of credit," which allowed them to maintain large percentage rates. 

According to the DoD, 11 percent of enlisted service members continue to access credit over the 36 percent threshold. If amended the rules would have no limit on the size and duration of loans, would include installment loans and lines of credit. Additionally these protections would apply to credit cards, and overdraft fees.
San Antonio has an abundance of both military personnel and payday loan shops, as well as a high concentrationof these shops surrounding places where military personnel are known to be.

According to new data from Texas Appleseed , a left-leaning policy advocacy group, 48 percent of veteran and Texas military facilities have five or more payday lending shops in the same zip code. San Antonio ranked third highest in concentrations of payday lender shops in the same zip code as military and veterans service providers.


  • Ann Baddour, policy analyst at Texas Appleseed and appointee to the Consumer Advisory Board at the Consumer Financial Protection Bureau
  • Gary Kalman, executive vice president at the Center for Responsible Lending
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Paul Flahive can be reached at Paul@tpr.org