Monday, December 3, 2012
Senate Unanimously Approves Reed Amendment to Protect Military Families from High-Cost Loans and Unfair Credit Practices
WASHINGTON, DC – In a victory for military families, the U.S. Senate today approved Senator Jack Reed’s (D-RI) amendment to the 2012 Defense Authorization bill to crack down on unscrupulous lenders and help prevent them from charging excessive fees to soldiers and their families.
In 2006, Congress passed the Military Lending Act (MLA) to help protect active-duty service members and their families from certain types of high-cost loans and unfair credit practices. But since the MLA was passed, some lenders have circumvented the law by offering troops payday loan-style products with interest exceeding well beyond the 36 percent annual limits set for members of the military. The Reed amendment strengthens the enforcement provisions of the Military Lending Act (MLA).
“We need to stop unscrupulous lenders from targeting our soldiers, saddling them with enormous debt, and undermining our national security. This amendment enhances the Military Lending Act by allowing federal regulators to use all of the tools at their disposal to make sure lenders are following the law” said Reed, a former Army Ranger and senior member of the Armed Services and Banking committees. “We need to crack down on abusive lenders and aggressively go after those who violate the Military Lending Act.”
Currently, if a lender violates the Military Lending Act, it is a criminal misdemeanor, with violators to be fined as provided for in title XVIII or up to 1 year imprisonment or both. Criminal liability applies only for knowingly violating the statute. The Reed amendment will allow all federal agencies responsible for federal credit laws to use their civil enforcement capabilities to enforce the 36% interest rate cap applied to certain financial products and services for servicemembers and their families.
Senator Reed’s amendment is supported by the Fleet Reserve Association, the Military Officers Association of America, the National Association of Consumer Advocates, the Military Justice Project, the National Military Family Association, Americans for Financial Reform, the Center for Responsible Lending, U.S. PIRG, the Consumer Federation of America, and the National Consumer Law Center.