“[L]ike bears in a trout stream.”
That is how a senior official with the federal Consumer Financial Protection Bureau quoting a report on payday lenders recently termed bad actors from that industry that target areas around military installations to prey on service members and their families.
Their goal: to ensnare their customers in a cycle of ever-spiraling debt. Government officials noting the problem state that military customers are pursued by predatory lenders at about double the rate that civilians are targeted.
The reasons why are clear. As reported in a recent Wall Street Journal article, military members “often require short-term loans for small amounts of money” to make payments on vehicles and other items.
And when they ink a contract with a payday lender, the results are often adverse in the extreme. Anecdotal evidence points to cases where some military personnel might have paid — or are still paying — principal back to lenders that has interest as high as 700 percent tacked on.
The Military Lending Act, passed several years ago, anticipated lenders’ usurious practices, placing interest ceilings on loans to service members at 36 percent, but it didn’t take the industry long to figure out ways to circumvent that limit. New types of loan products effectively skirted requirements and emasculated borrowers.
Speaking last month in Pennsylvania, President Obama announced a number of reforms to existing legislation that are intended to close the loopholes lenders have found.
Such changes are of course welcome and timely. They also spotlight the underhanded tactics used by predatory lenders to take advantage of consumers in ways that contribute materially to financial penury.
Predatory lending is certain unethical, and it is often flatly illegal. Persons with questions or concerns regarding onerous loan obligations can contact a proven consumer protection attorney for advice and legal representation.
Source: The Wall Street Journal, “U.S. to expand Military Lending Act in effort to protect service members,” Gordon Lubold and Byron Tau, July 21, 2015