Do Payday Lenders Skirt the Military Lending Act?

While payday lenders and the government continue to spar over rate caps, zoning laws, and moral correctitude, the Military Lending Act already restricts the lenders? practices when they relate to active service members. By law, payday lenders can only give short-term loans to military if the annual percentage rates sit at 36% or lower. The term short-term in this case refers to loans lasting three months or less.

However, some argue that the payday lending industry circumvents these laws or finds loopholes to continue to provide high-interest loans to military members. Senator Dick Durbin recently to Republica, in reference to the Military Lending Act, ?If we?re serious about protecting military families from exploitation, this law has to be a lot tighter.?

So what are these so-called loopholes? Here are a few examples:
*Offering military families installment loans, where they pay back a set sum every time over a period of months or years.
*Using auto-title lending, where a consumer gives the lender the title to his or her car and ?buys it back? by repaying a high-interest loan.
*Lengthening the terms on traditional payday loans, so that they last longer than three months and are no longer subject to the law.

Some companies offer three-month loans at rates that fall at 36% or below but then offer ?refinances,? where a consumer can continue to pay on the loan but at a considerably higher rate if he or she cannot afford to pay it off.

Military personnel, especially when they are new to the service, are often faced with financial trouble due to both low salaries and financial inexperience. This has led to an outcropping of storefront lenders near the gates of military bases. While the military does have financial assistance available, sometimes in the form of 0% loans, many are reluctant to use it for fear of losing their security clearances. Like in other instances, the argument remains: are payday lenders exploiting their customers or simply providing a needed service to a willing market?

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Source: http://www.advanceloan.net/news/do-payday-lenders-skirt-the-military-lending-act/

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