How Predatory Lenders Get Around The Law To Loan Money To Military Personnel
In spite of the Military Lending Act, a law intended to prevent predatory lenders from gouging military personnel with exorbitant interest rates and mountains of fees, some of these lenders have figured out ways to work around the very specific limits of the law, targeting active-duty service members with loans that are almost indistinguishable from the ones forbidden by the Act.
ProPublica has a detailed story on the many ways in which lenders of high-interest, short-term loans are circumventing the Military Lending Act, which effectively forbids the offering of payday and auto-title loans to active-duty service members by capping interest rates on all affected loans at 36%, significantly less than the triple-digit APRs typically seen with these types of loans.
In spite of the law, which went into effect in 2006, the Consumer Federation of America says that payday lenders haven’t vanished from around military bases. The group says that in 2012 there were the same number of payday stores in the area of Fort Hood in Texas that there were when the Act kicked in six years earlier.
Rather than be scared off by the law, these lenders have just adapted.
For example, there’s the Marine staff sergeant in South Carolina who, in desperate need of cash, signed up for a $1,600 auto-title loan — in which the borrower hands over the title to their car and a copy of their keys as collateral — that required him to pay back more than $17,000 over the course of 32 months, an APR of around 400%.
http://consumerist.com/2013/05/15/how-predatory-lenders-getting-around-the-law-to-loan-money-to-military-personnel/
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