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Citizen Action/Illinois Statement on Protections from Predatory Loans for Servicemembers

revised stmt re MLA rules July 2015.docx18.15 KB

In response to new rules implemented by the Department of Defense, Citizen Action/Illinois released the following statement:


August 4th, 2015

Statement by Lynda DeLaforgue, Co-Director, on Department of Defense rule updating Military Lending Act of 2006

New protections will stop lenders from exploiting loopholes to target servicemembers

With high-cost loans and abusive collection tactics


(Chicago, Illinois) – To protect servicemembers from payday lenders, high-cost installment lenders and other abusive credit providers, the Department of Defense  (DoD) has issued a comprehensive new rule to update the Military Lending Act—a 2006 law that capped interest rates and add-on fees to members of the military and their families at 36 percent.


Regulations implementing the law in 2007 capped rates for just a small number of loans, such as payday loans of 91 days or less and auto title loans of 181 day or less.  By extending the term or restructuring the loan, lenders have continued to target servicemembers – impacting their security clearance and jeopardizing their careers.


“Modernizing the Military Lending Act gives servicemembers and their families the financial protections they deserve and ensures that unscrupulous lenders can no longer evade the law,” said Lynda DeLaforgue, Co-Director, Citizen Action/Illinois and convener of the Egan Campaign for Payday Loan Reform.  “Cracking down on abusive lending will ensure payday lenders and others no longer threaten military readiness with predatory loans.”


The final rule will:

Apply market-wide to all high-cost credit products that target service members, including payday, auto title and installment loans designed to evade the 2007 protections;

Cap interest and add-on fees at 36 percent for loans issued to service members and their dependents;

Prevent lenders from using junk fees such as credit insurance, debt cancellation or debt suspension to circumvent the 36 percent interest and fee cap;

Preserve service members’ access to the courts by prohibiting forced arbitration agreements.


Research by the DoD released last year found that as many as one out of every ten enlisted servicemembers continued to be targeted by high-cost credit designed to evade the Military Lending Act. The DoD estimates that the final rule will reduce involuntary separation caused by financial hardship, resulting in a savings of $14 million a year or more. 


“The final Military Lending Act rule will protect servicemembers from financial abuse and keep safe and sustainable lending available to our men and women in uniform," said DeLaforgue “We are grateful to leaders from the Illinois delegation like Rep. Tammy Duckworth who led the fight for reigning in predatory lenders who target our servicemen and women.”