CHICAGO (Legal Newsline) - Illinois Attorney General Lisa Madigan urged the U.S. Department of Defense on Monday to strengthen regulations under the federal Military Lending Act to protect service members from predatory lending practices.
Madigan and 12 other attorneys general submitted a letter to U.S. Secretary of Defense Chuck Hagel in response to proposed new regulations under the MLA. In 2007, Congress passed the MLA to establish a 36 percent ceiling on interest and fees on certain consumer credit transactions with service members.
The regulations currently limit the protections to only three definitions of consumer credit. The protections are limited to tax refund anticipation loans, vehicle title loans for a term of 181 days or less and payday loans of up to $2,000 for a term of 91 days or less.
The three narrow definitions of consumer credit covered by the MLA are allowing predatory lenders to structure their high-cost loans in a way that evades regulations. Some lenders offer payday loans at $2,001 or require a minimum repayment period of 92 days to allow them to avoid the cap of a 36 percent interest rate.
“Service members are unfortunately prime targets for predatory lenders,” Madigan said. “The Department of Defense must close the loopholes in the law because those who serve our country don’t deserve to be defrauded by predatory lenders.”
Madigan and the other attorneys general emphasized that the MLA protections should apply uniformly to all consumer credit loans. The letter raised concern about a lack of coverage for any revolving or open-ended payday loans, bank loans secured by funds on deposit and all retail sales credit loans or similar rent-to-own transactions.
The other attorneys general joining on the brief included officials from Washington, Tennessee, Oregon, New York, Nevada, North Carolina, Montana, Kentucky, Indiana, Florida, Delaware and California.