“We need to crack down on abusive lenders and aggressively go after banks that violate the Military Lending Act.”
Reed’s amendment would ensure banks can’t apply new labels on the same exorbitantly high-interest payday loans that the MLA was designed to prohibit.
The amendment would make it clear that the law applies to “open-end” credit as well as “closed-end” credit; would help end the practice of charging high-cost overdraft fees, averaging $34, for each individual debit card transaction that the financial institution approves; and would end the practice of reordering customers’ transactions from largest to smallest to maximize overdraft fees.
The Federal Deposit Insurance Corp. recently advised the financial institutions it supervises not to post transactions in order from highest to lowest, Reed said. But this guidance does not apply to financial institutions supervised by other federal regulators.
The Military Lending Act was passed following a 2006 Pentagon report that found 17 percent of service members used payday loans and that “predatory lending undermines military readiness, harms the morale of troops and their families and adds to the cost of fielding an all-volunteer fighting force.”