MIL New Rules Limit "Predatory" Lending to Servicemembers.

Discussion in 'On Topic' started by Sharkticon, Oct 1, 2007.

  1. Sharkticon

    Sharkticon The safest place in combat is on an AEGIS Class Gu

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    WASHINGTON, Sept. 28, 2007 - The Defense Department is instituting new protections that will help defend servicemembers against high-interest emergency loans that can lead to a dangerous cycle of debt.

    A new regulation included in the 2007 National Defense Authorization Act limits the annual percentage rate on payday loans, vehicle title loans and tax refund anticipation loans to 36 percent for active-duty servicemembers and their families. The change takes effect Oct. 1.

    This is a big change, as the interest rates on these "predatory" loans can run as high as several hundred percent, said David S.C. Chu, undersecretary of defense for personnel and readiness. Troops and their families have often fallen victim to these loans when they come up short between paychecks, and they can lead to serious problems, he said.

    "It's a big problem for commanders, because what happens is often these households get themselves in over their heads," Chu said. "They're $200 short between now and next payday, but they're no better off when payday comes, so they need a bigger loan, and it just goes downhill from there."

    The 36 percent limit in the regulation includes all fees and charges, and the rule prohibits contracts requiring the use of a check or access to a bank account, mandatory arbitration and unreasonable legal notice, Chu said. The regulation makes it a criminal offense for lenders to knowingly charge a higher interest rate to servicemembers, so it is essential that military members be honest about their status when applying for loans, he said.

    "One of the things that we're a little worried about is people may be tempted, in order to get this old product that is now off limits, to answer this question in a non-factual way," Chu said. "They need to be honest."

    It is the states' responsibility to enforce the regulation, Chu said, and already 27 states have stepped forward and agreed to enforce restrictions on the financial institutions. The department has received the assurance of federal regulators that they will oversee the institutions they regulate, he said.

    In addition to implementing this new regulation, the Defense Department also is stepping up efforts to educate servicemembers about financial planning and where to go for help in an emergency, Chu said. Many times, servicemembers can go to their bank or credit union directly and ask what loan products they have available, he said, or they can go to their military aid societies or the family community support centers.

    In addition, most institutions that troops would owe money to, including the Internal Revenue Service, often are willing to work with clients to defer payments. Servicemembers also can go to the online resources Military OneSource and Military Homefront for information on financial planning.

    "The first defense here ... is good education for our people so they understand better how to manage their finances wisely, so they don't get themselves in trouble and so they don't come up short at the end of the month or the end of the pay period," Chu said. "But if they do, they know where to turn and how to get help."

    This regulation is important because financial readiness directly affects mission readiness for military members, Chu said. If a troop is worried about an unpaid credit card bill, a needed car repair, or any other financial crisis, he won't be able to focus on the mission. Chu said commanding officers from around the military have applauded the Defense Department's efforts in this arena, because individual financial problems often cause unit readiness problems.

    "As commanders, even at the division level, they are dealing with the fallout among their people from these kinds of payday loans," Chu said.
    "They want to get this problem off the screen; they want to solve the problem too. I think we have a whole community that's ready to move forward."

    The Federal Deposit Insurance Corporation, which guarantees deposits by commercial banks, has agreed to work with the Defense Department on this regulation, because it is a chance to promote emergency small loans for servicemembers, as well as other citizens in the United States, Chu said.

    "We are perhaps at the leading edge of a national movement, trying to put better financial management on everyone's screen, military and civilian, and of course ultimately, that is the goal -- that our people are better equipped to deal with financial issues," he said.
     
  2. NisAznMonk

    NisAznMonk New Member

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    Waste of fucking time.

    These businesses aren't out there to get you. They just provide a service to military members who don't know how to follow a budget. The military member's temptations come from the shit that they want to constantly buy but have no means on buying it. Can't blame anyone except those who can't create and follow a budget.
     
  3. jjski78

    jjski78 New Member

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    You wouldn't be talking about the E-1's through E-3's that drive fucking Hummers and Escalades, would you?? Or the ones that rent to own their 24" wheels?? I'm an E-5 married to another E-5 and there's no way in hell we could afford some of the shit these airmen get. And we don't have many bills! Mortgage, and one car, that's it! Live within your means people, live within your means.
     
  4. NisAznMonk

    NisAznMonk New Member

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    You read my fucking mind. I went to tech-school with an E-1 that bought a brand new Honda S2000 3 weeks AFTER BMT. He barely had enough money to pay for gas and insurance, but he said it was his first car and he had to have it. Funny thing was his first assignment was to OSAN :rofl:.



    My supervisor is an E-5 married to another E-5 (Tech select) and he claims he is ballin! But then he says his first kid is due in December, and his wife won't let him spend the money stupidly :mamoru:. Apparently mil-mil marriages get paid decently when they are both stationed overseas.
     
  5. Jyokker

    Jyokker The trouser snake is very aggressive. It will corn

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    Financial Manangement, some people understand it, some don't.
     
  6. Sharkticon

    Sharkticon The safest place in combat is on an AEGIS Class Gu

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    I'm a firm believer that financial management should be taught in bootcamp or as part of INDOC at a service members first permanent command. I was a financial counselor and it's scares me to know that alot of new people do not know what a check registry is or how APR works when financing a car.

    These payday lending places feed off those ignorant service members constantly.
     
  7. NisAznMonk

    NisAznMonk New Member

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    Not sure about other military services, but the AF makes an attempt to teach that stuff in BMT, and at their first duty station during FTAC. Regardless of what sort of financial training, advice, spoon-feeding these people get if you are an idiot you will remain an idiot. Ignorance doesn't play that big of a part in this because I am damn sure that every service member has been broke at one point in their life. If they want to continue living on that fine line then let them. I'd rather go play basketball for 2 hours than spend it with a financial counselor because I can't control my urges at the BX during DVD new release tuesdays :rofl:
     
  8. NisAznMonk

    NisAznMonk New Member

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    Man sometimes that sort of stuff is heartbreaking. I know people who sold their family heirlooms just to buy rims even when their rent was due.

    Some people will never learn even if they've gone through through this financial ass-pain a hundred times. If I was a betting man I would bet that they probably looked at setting a budget maybe 10% of the time, while the other 90% was trying to figure out how to get more money.

    Some of the most recent crap I've read about online is how military member's (or their wives) can't believe that the SCRA won't lower their CURRENT credit card APR's to the 6% mark. Even after being in for 19+ years they couldn't get that right LOL. http://forums.about.com/n/pfx/forum.aspx?tsn=1&nav=messages&webtag=ab-usmilitary&tid=83180
     
  9. Sharkticon

    Sharkticon The safest place in combat is on an AEGIS Class Gu

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    Some newbies we have them sign page13s stating that they are not allowed to make any purchases that require a finance agreement without approval from a senior enlisted within their chain of command.

    I actually had to go to a dealership and tear up the contract one of my sailors signed. He purchased a car with financing from Navy Federal but the bank got his rank wrong and the financing fell through. Well, what I didn't know was my sailor signed a BLANK CONTRACT and ended up with a 36% interest rate on a $6000 loan.
     
  10. NisAznMonk

    NisAznMonk New Member

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    Why isn't that enforced across the board with all E1-E4? I would think that would make alot of sense. Then again there are plenty of lazy NCO's in the AF.
     

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