USA4 Military Families: Consumer Protections and Enforcement of Predatory Lending Regulation

Through the USA4 Military Families initiative, the Department of Defense works with and educates state policymakers, not-for-profit associations, businesses and other state leaders to improve the quality of life for service members and their families. The initiative encompasses key issues ranging from improvements to childcare to improving transition from military service.

Issue: Promote consumer protections and enforcement of the predatory lending regulation

Through a DoD regulation implementing the law, the Military Lending Act places limits on some types of consumer credit available to service members and their immediate families. The loans limited are payday loans, vehicle title loans and tax refund anticipation loans. For these types of loans, the DoD regulation limits the amount a lender can charge including interest, fees and charges imposed for credit insurance and other credit-related ancillary products sold in connection with the loan. Among other provisions, the DoD regulation:

  • Prohibits certain loan terms, such as prepayment penalties, mandatory arbitration clauses and unreasonable legal notice requirements
  • Restricts loan rollovers and refinancing
  • Requires special disclosures (written and orally) in addition to those required by the Truth in Lending Act
  • Provides a safe harbor and model form for lenders to use in connection with identifying covered borrowers

If a lender knowingly violates the rule, the lender may be subject to civil and criminal penalties. Additionally, any loan agreement made to a covered borrower that violates the law is void from inception.

The military is primarily composed of young people: about 43 percent of the active force is 25 years old or younger. As junior enlisted service members, many of them receive a steady paycheck for the first time in their lives and they often lack sound financial experience. This lack of experience can lead to making bad decisions when managing finances. If they turn to using payday loans, vehicle title loans or other high interest/fee loans, they can create an unending cycle of debt. While personal financial issues impact family life, these issues can also directly and indirectly affect military readiness. Leaving debts unchecked without seeking assistance can lead to added stress, problems at work and potential disciplinary actions.

What the DoD is doing to help you

Like any law, it only provides protections if enforced. The DoD believes that creditors will comply with the law and regulation if state laws allow their credit administrators to enforce the regulation. With this authority, state credit administrators can determine corrective action when lenders violate the regulation or other issues identified through consumer complaints.

Through the USA4 Military Families initiative, the DoD collaborates with each of the states to support military families. Specifically related to the issue of consumer protections and enforcing the predatory lending regulation, the USA4 Military Families initiative works with states to achieve the following:

  • Extend state authority over the DoD regulation - The DoD is working with states to request that they modify state laws to include the provisions of the DoD regulation and allow state regulatory bodies (such as credit administrators) to enforce the regulation.
  • Partner with the Federal Trade Commission - The DoD is asking state credit administrators to sign a memorandum of understanding with the FTC to allow the state agencies to access FTC's Military Sentinel. Military Sentinel provides law enforcement and regulatory agencies access to a secure nationwide database of allegations of fraud, deception and abusive practices reported by service members and family members. The information in Military Sentinel can support potential investigations by state credit administrators into credit companies with abusive practices and help state credit administrators discover trends in abusive practices that may require additional enforcement or new statutory/regulatory control.

More information

More information on the issue of consumer protections and enforcement of predatory lending regulation can be found on the following websites:

  • USA4 Military Families - The USA4 Military Families website provides an overview of key issues addressed through the initiative and the status of each issue by state. More information is available on the USA4 Military Families website.
  • Consumer Financial Protection Bureau Office of Servicemember Affairs - The Consumer Financial Protection Bureau works to give consumers the information they need to understand the terms of their agreements with financial companies. The Office of Servicemember Affairs ensures that military personnel and their families have a voice at the Consumer Financial Protection Bureau. More information is available on the Consumer Financial Protection Bureau website.
  • Just Sign on the Dotted Line? Beware! The Consumer Financial Protection Bureau - This article from Military OneSource provides an overview of the Consumer Financial Protection Bureau. The article is available on the Military OneSource website.






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