By Ramsey Cox
“Given the many sacrifices military families make, it is deeply disturbing that predatory lenders would target them with exploitive financial schemes,” Sen. Mazie Hirono (D-Hawaii) said Wednesday. “I’m proud to join with my colleagues in urging the Department of Defense to tighten up financial protections for military families and close loopholes that leave service members vulnerable to these predatory practices.”
The Department of Defense has the authority to write rules to protect service members from certain predatory loans, but the senators said the DOD failed to include high-interest products, such as overdraft loans, installment loans, nontraditional payday loans and nontraditional car title loans in its definition of “consumer credit.”
“Due to the narrow definition of consumer credit, certain lenders are offering predatory loan products to service members at exorbitant triple digit effective interest rates and loan products that do not include the additional protections envisioned by the law,” the letter stated. “Service members and their families deserve the strongest possible protections and swift action to ensure that all forms of credit offered to members of our armed forces are safe and sound.”
Currently, loans that fall under the definition of consumer credit are capped at an interest rate of 36 percent. The DOD is considering rule changes to its consumer credit protection program. The lawmakers said that if the DOD expanded its definition of consumer credit to apply to more types of loans, then rates for service members would not exceed the 36 percent mark.
In addition to Hirono, Democratic Sens. Jack Reed (R.I.), Dick Durbin (Ill.), Mark Udall (Colo.), Joe Donnelly (Ind.), Brian Schatz (Hawaii), Tom Udall (N.M.), Richard Blumenthal (Conn.), Bill Nelson (Fla.), Tom Harkin (Iowa), Sheldon Whitehouse (R.I.), Claire McCaskill (Mo.), Elizabeth Warren (Mass.), Jeff Merkley (Ore.), Al Franken (Minn.), Ed Markey (Mass.), Kirsten Gillibrand (N.Y.), Mark Warner (Va.), Ron Wyden (Ore.), Patty Murray (Wash.), Sherrod Brown (Ohio), Martin Heinrich (N.M.) and Tammy Baldwin (Wis.) signed the letter.