thedrifter
10-01-07, 07:32 PM
New payday loan rate cap takes effect
By Karen Jowers - Staff writer
Posted : Monday Oct 1, 2007 17:44:23 EDT
A new law that caps interest rates on loans to service members and their families at 36 percent takes effect Monday, but consumer advocates say the real work is just beginning.
“There’s law, and then there’s compliance,” Jean Ann Fox, director of consumer protection for the Consumer Federation of America, told representatives of the Navy-Marine Corps Relief Society at its international conference in Potomac, Md.
Fox noted that the military relief societies are often the frontlines in helping service members who have fallen victim to predatory lending. “We need you to monitor what’s going on with the variations on the theme,” she told the group, urging them to let her know of any efforts to sidestep the new Military Lending Act.
“We can’t rest on our oars, because the predatory loan industry will find a way to manipulate around,” retired Adm. Charles Abbot, president and chief executive officer of Navy-Marine Corps Relief Society, told the group of representatives gathered from all over the world.
The Navy-Marine Corps Relief Society, National Military Family Association, Military Officers Association of America and others were among the groups that stood with national consumer advocates in supporting the legislation that limits the interest rate on small loans for military personnel and their families to 36 percent, among other things. Some lenders were charging 391 percent annual percentage rate or higher, when all fees were factored in.
“We’ve tried to do a good-faith job of using the experience of those we deal with every day to convey the difficult circumstances of sailors and Marines who got payday loans and made their situation worse,” Abbot said. “There were cases where it ruined families. We know legislation was an essential and necessary step. Education on its own was not going to do it.”
While continuing its efforts to educate troops and families about seeking out less expensive loan alternatives at banks and credit unions, the society is also conducting its own pilot program for a fast, no-interest loan alternative.
Defense Department regulations implementing the law limit the scope to payday loans, vehicle title loans and tax refund anticipation loans.
Abbot said the law that takes effect today will force a change of course in the industry, because if a lender provides one of the prohibited loans to a service member or a family member, the loan will be “null and void,” and thus will not have to be repaid.
The change of course “is a very good thing,” he said. “But … we know from experience that payday lenders will morph and find ways around the law. We’ll collect data from clients who fall prey to amended actions and provide information to responsible authorities when asked.”
Fox said if the society’s representatives or service members believe a lender may be violating the law, they should notify their local installation legal office, and report it to their state’s regulating authority. Contact information for states can be found at the Consumer Federation of America Web page about payday loans.
www.paydayloaninfo.org/
Ellie
By Karen Jowers - Staff writer
Posted : Monday Oct 1, 2007 17:44:23 EDT
A new law that caps interest rates on loans to service members and their families at 36 percent takes effect Monday, but consumer advocates say the real work is just beginning.
“There’s law, and then there’s compliance,” Jean Ann Fox, director of consumer protection for the Consumer Federation of America, told representatives of the Navy-Marine Corps Relief Society at its international conference in Potomac, Md.
Fox noted that the military relief societies are often the frontlines in helping service members who have fallen victim to predatory lending. “We need you to monitor what’s going on with the variations on the theme,” she told the group, urging them to let her know of any efforts to sidestep the new Military Lending Act.
“We can’t rest on our oars, because the predatory loan industry will find a way to manipulate around,” retired Adm. Charles Abbot, president and chief executive officer of Navy-Marine Corps Relief Society, told the group of representatives gathered from all over the world.
The Navy-Marine Corps Relief Society, National Military Family Association, Military Officers Association of America and others were among the groups that stood with national consumer advocates in supporting the legislation that limits the interest rate on small loans for military personnel and their families to 36 percent, among other things. Some lenders were charging 391 percent annual percentage rate or higher, when all fees were factored in.
“We’ve tried to do a good-faith job of using the experience of those we deal with every day to convey the difficult circumstances of sailors and Marines who got payday loans and made their situation worse,” Abbot said. “There were cases where it ruined families. We know legislation was an essential and necessary step. Education on its own was not going to do it.”
While continuing its efforts to educate troops and families about seeking out less expensive loan alternatives at banks and credit unions, the society is also conducting its own pilot program for a fast, no-interest loan alternative.
Defense Department regulations implementing the law limit the scope to payday loans, vehicle title loans and tax refund anticipation loans.
Abbot said the law that takes effect today will force a change of course in the industry, because if a lender provides one of the prohibited loans to a service member or a family member, the loan will be “null and void,” and thus will not have to be repaid.
The change of course “is a very good thing,” he said. “But … we know from experience that payday lenders will morph and find ways around the law. We’ll collect data from clients who fall prey to amended actions and provide information to responsible authorities when asked.”
Fox said if the society’s representatives or service members believe a lender may be violating the law, they should notify their local installation legal office, and report it to their state’s regulating authority. Contact information for states can be found at the Consumer Federation of America Web page about payday loans.
www.paydayloaninfo.org/
Ellie