In a bid to extend financial protections to the military personnel and their family members, the U.S. Department of Defense on Friday proposed changes in to the Military Lending Act (MLA), passed by the Congress in 2006.
According to the experts, the move will help in reducing the predatory lending practices, while closing loopholes in current rules and offering families consumer protections.
The proposed set of rules would also expand protections against loans, ranging from all forms of payday loans, vehicle title loans and refund anticipation loans to deposit advance loans, installment loans and unsecured open-end lines of credit and credit cards.
“Some lenders responded by changing their products to fall outside the regulations narrow scope, thus allowing many predatory lending practices to continue and defeating diminishing the full impact of the legislation to protect our Military families,” the DOD said in a press release while announcing the financial regulation proposal.
Under the existing law, the military service members and their families get benefit from a 36 percent interest-rate limit on all interest and fees, while prohibits creditors from requirement of onerous legal notice or submit to arbitration and forcing service military member to waive their rights to certain credit protections.
According to the well informed sources, these financial regulations introduced as operations related to the predatory loan were clustering around military installations geared toward the members in service, leaving them charged with high interest and complex loans.
As per a defense survey by Manpower Data Center, 11 percent of enlisted troops were found using loans with interest rates that were higher than the 36 percent cap that the Congress tried to impose.
The set of proposals for changing the financial regulations on military personnel and their families will be published in the Federal Register for public comment on Monday. Meanwhile, the recommendations made by the DOD do not need any Congressional approval to implement the changes. But the exact schedule by which the DOD’s new rules are expected to go into effect is not revealed.