In 2007 Congress passed an Act that they hoped would protect our soldiers from the predatory loans that keep struggling newcomers in debt. The National Defense Authorization Act (NDAA) for fiscal year 2007 included the Military Lending Act. It stated that payday loans, vehicle title loans, and tax refund anticipation loans cannot have a higher annual percentage rate than 36% when lent to military personnel. It said these loans cannot be automatically financed either.
Yet Michael S Archer, director of military legal assistance for Marine Corps Installations East says he still sees rising numbers of military personnel caught in a cycle of debt. Loan places like Just Military Loans and Pioneer Financial are finding ways around the Military Lending Act. They offer longer, larger loans that fall through the safety net Congress created. Since the MLA covers short loans under two grand, these companies are offering just a bit more money with a few more days to pay it back. It seems like it would be beneficial to a struggling debtee. Until they charge interest rates that sometimes exceed 80% and refuse to lend unless the soldier agrees to automatic payments from his or her paycheck. The Military Lending Act was meant to protect military personnel without taking away their access to credit altogether.
So now it is not doing enough. Congress is still concerned about the threat these payday loans have on our national security. Indebted servicemen and women threatened with the loss of their house or job are more likely to accept bribes or commit espionage out of desperation. Instead of focusing on their careers and families, military personnel are struggling to keep their heads above the bottom line.
Government agencies are taking another look at what they can do for our military. On Wednesday the Senate Commerce Committee held a hearing to discuss what is and is not covered by the NDAA. Senator Jay Rockefeller described federal protections as “insufficient” and it seems like everyone else agrees. They intend to fix the problem. This time, hopefully, for good.
Short term lenders know their clientele. Many of their employees are former military. They offer debt relief that is readily available; they offer referral fees, loan parties, and loans to cover other loans from other vicious lenders. They use threats to motivate their victims into accepting more supposed relief. Their cycle keeps old customers coming back while catching new ones when they are vulnerable.
Congress is preparing to break the cycle so our soldiers can focus on more important issues.