Consumer protections for troops and their families should be broadened to cover not only payday loans but also products such as overdraft checking, installment loans, and rent-to-own contracts, consumer advocates say. These recommendations are part of a response to the Defense Department, which posted a Federal Register notice calling for input on the possible enhancement of existing rules on consumer credit.
Many financial institutions support the department's efforts to restrict lenders that unfairly target servicemembers but point out that too many restrictions could curb the availability of financial services. In the 2013 Defense Authorization Act, lawmakers said the DoD should review its regulations that implement the Military Lending Act of 2006 -- which adopted an annual interest rate cap of 36 percent for loans to troops and their families, excluding only mortgages and auto-finance loans. In implementing the law, however, the DoD narrowed the definition, limiting the 36 percent rate cap to payday loans with terms of 91 days or less and worth no more than $2,000, auto title loans, and refund anticipation loans. Some state attorneys general have warned that their laws would not protect service members from interest rates over 36 percent under the DoD parameters.