Tester protecting service members from predatory lending
Senator pushes Defense Secretary to implement new rules for military members, families
(Big Sandy, Mont.) – Senator Jon Tester today sent a letter to Defense Secretary Chuck Hagel calling on the Defense Department to implement tough new guidelines to better protect service members from predatory lending.
After a 2006 report found that 17 percent of service members used payday loans and often fell victim to predatory lending, Congress passed the Military Lending Act (MLA) to limit interest rates for certain loans. But with some lenders still finding ways to charge high interest rates, the Defense Department is considering tougher rules to close loopholes in the law.
Tester and 38 colleagues say it’s time for the department to act, given that high-cost debt detracts from mission focus and reduces service members’ productivity.
“By enacting the MLA, Congress sent a clear bipartisan message that protecting service members and their families from predatory and high cost lending was of paramount importance to their financial security and military readiness,” Tester told Hagel. “As a result, we strongly agree with the Defense Department that the proposed MLA rule has not only the potential to produce cost savings, but also enhance military readiness.”
One proposed rule would expand the definition of “consumer credit” to cover a broader range of credit products. Loans that qualify as “consumer credit” are subject to tougher protections.
According to the Defense Department, financial distress reduces military readiness. A study by the military found that each year approximately 4,700 to 8,000 service members who involuntarily leave the military do so because of financial stress, costing the department nearly $60,000 per member.
Tester co-sponsored the Military Lending Act in 2011 and this year pushed to help service members with burdensome student loan payments with his Service Member Student Loan Relief Act.