The Battle Against High-Cost Lending to Military Families

May 15, 2013

The 2006 Military Lending Act (MLA) -- which capped interest rates on payday loans, auto title loans, and refund anticipation loans at 36 percent for members of the armed forces and their families -- has greatly limited access to these products. However, a joint investigation by ProPublica and Marketplace has found that other types of alternative financial products are still widely available to enlisted persons, at a steep cost. In the interest of not shutting off credit completely to military borrowers, the MLA did little in the way of regulating open-ended credit or installment loans with terms lasting more than 91 days. Meanwhile some payday and title outfits have continued to offer their products but with the longer terms that exempt them from MLA regulation. "Soldiers are a sure source of income," explains Army Captain Brandon Archuleta. "When soldiers are back from Iraq or Afghanistan, they are itching to spend money." The spending sprees, however, are often followed by debt collection efforts -- which start with the service member but eventually reach his or her commanding officer. "People don't want to come in and say they've messed up their finances," notes Holly Petraeus, assistant director of the Consumer Financial Protection Bureau. "And yet, with products where they're just repeatedly paying large fees to borrow the same small amounts every month -- you're going to end up in a terrible financial mess, and with the real potential of losing your security clearance."
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