Why You Need to Care About the Military Lending Act Makeover

Lots of money

Predatory lenders have always had their sights set on service members and their families, but you don’t have to be the next victim. The Military Lending Act (MLA) was designed to protect military families, and could start being even more effective if a new proposal passes.

Expanding Protections

In response to requests from our Association and other veteran and military service organizations, the Department of Defense is proposing new language for the MLA. If approved, the revisions would close detrimental loopholes and expand protection for service members seeking a quick loan.

According to a Fact sheet issued today, the changes would align the coverage of the MLA with the Truth in Lending Act so that it applies to more types of lending products, including:

  • Payday loans
  • Vehicle title loans
  • Refund anticipation loans
  • Deposit advance loans
  • Installment loans
  • Unsecured open-end lines of credit
  • Credit cards

Another important change is that lenders won’t be able to require service members and their dependents to waive their legal rights when they apply for a loan. The changes would not apply to mortgages or purchase-money loans, like car loans.

You Have Been a Target for Years

Many service members are young and financially inexperienced, but since they have a dependable paycheck, they can pay back loans by automatic deduction. Plus, the military often requires that service members pay their debts.

The MLA was created in 2007 to protect against certain types of payday, auto and refund anticipation loans with certain dollar or time limits for repayment.

The chargeable interest rates for these types of loans were capped at 36 percent, reducing rollovers on the debt that often resulted in triple-digit interest rates. It was a good start. But because of the narrow scope of the Act, many types of predatory loans weren’t included—so small loans were putting military families into extraordinary debt.

Don’t Become a Victim

Financial stressors are identified as one of the leading factors in suicide attempts and death by suicide. The expansion of protections under the MLA reduces financial stress by creating a deterrent between service members and unscrupulous lenders.

There is help available. Plan ahead – create an emergency fund so you don’t have to resort to quick loans. Work with the folks at the military banks and defense credit unions who are chartered to provide financial training. These institutions have also developed credit options that can provide military families with short term loans at reasonable rates. And if you do have to use another lender, do your financial homework:

  • Know your rights under the MLA.

  • Read the fine print.

  • Contact your Servicemember Relief Society for financial assistance:

Creating a financial plan and avoiding financial pitfalls can go a long way to contributing to the overall well-being of your military family.

Posted October 13, 2014

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