Obama Admin Seeks to Expand MLA, Reduce Predatory Lending
The Obama Administration and the U.S. Department of Defense (DoD) are aiming to curtail predatory lending practices by expanding the protections offered to active service members and their families.
These actions are intended to broaden the Military Lending Act (MLA), crushing loopholes in current statutes by allowing it to cover all forms of payday, refund anticipation, and vehicle title loans. Additionally, the Obama Administration hopes to expand the MLA’s protections to include installment loans, deposit advance loans, credit cards, and unsecured open-end lines of credit.
While changes to the Military Lending Act strictly apply to active duty service members, the Consumer Financial Protection Bureau (CFPB) is looking at ways to approach similar practices as they affect civilians, such as high-interest payday loans.
A payday loan is a small sum of money that’s lent to a borrower with the understanding that it will be paid in full when the borrower gets his or her next paycheck. Every year, millions of Americans take out payday loans, including members of the U.S. military. Due to the nature of these loans, the interest rates can be staggering, often nearing 400%.
While stricter lending caps and more involved underwriting practices could make a world of difference to millions of Americans, it may be some time before we seen anything put into action. Lenders will continue to fight alterations to the existing policies, because such changes are a threat to their own ability to prey on borrowers. Because of this, it’s now more important than ever for consumers to pay close attention to the conditions that apply to the loans they borrow.
Regardless of whether you’re a civilian or an active member of the military, you still have explicit rights under federal law. Remember, creditors and debt collectors are obligated to respect these rights, no matter how much you may owe.
What are your thoughts? Do you think the policies surrounding payday loans and similar, high-interest loans need to change? Let us know in the comments.