Defense Department Plans for Tighter Small-Dollar Lending Rules

Bloomberg BusinessWeek
June 25, 2012
Fidel, Emma; Dougherty, Carter

The U.S. Department of Defense intends to strengthen rules aimed at stopping abusive lending that targets members of the military. The Senate Armed Services Committee on June 6 gave the green light to amendments of the 2006 Military Lending Act as part of an annual review of defense policy, including applying the definition of payday loan to other high-interest products. "The legislation has been extremely effective in stamping out abuses involving these types of credit," said Col. Paul Kantwill, director of legal policy in the Department of Defense’s Office of the Undersecretary for Personnel and Readiness. The law, a response to complaints from the Pentagon that payday loans harmed servicemembers and impaired troop readiness, restricted interest on the loans to no more than 36 percent. Advocacy groups, arguing that some lenders have evaded such laws by redefining their products without lowering interest rates, wrote to senators on June 25 to support the proposed changes.
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