Attorney General Masto Urges Stronger Servicemember Protections Against Predatory Lending


June 24, 2013

Las Vegas, NV – Nevada Attorney General Catherine Cortez Masto urged the U.S. Department of Defense (DOD) to strengthen regulations of the federal Military Lending Act (MLA) to protect servicemembers and military families from abusive lending practices.

    “Sadly our servicemembers are targets for predatory lenders and may resort to non-traditional lenders rather than seeking financial assistance from their military commands,” said Masto. “I will continue working with my colleagues to close loopholes that ultimately protect servicemembers who risk their lives for us.”

      Along with 12 other Attorneys General, Masto submitted a letter to U.S. Secretary of Defense Chuck Hagel in response to the proposed new rules under the MLA. In 2007, Congress passed the MLA, establishing a 36 % cap on interest and fees on certain consumer loans, and prohibited lenders from securing loans with personal checks or automatic bank account authorizations. However, the DOD regulations currently limit the protections to three narrow definitions of consumer credit:

      • Payday loans of up to $2,000 for a term of 91 days or less;
      • Vehicle title loans for a term of 181 days or less (except to purchase the car); and
      • Tax refund anticipation loans.

        Masto, along with the other attorneys general stressed that the protections in the MLA should apply uniformly to all consumer credit loans. They also raised concern about a lack of coverage for any open-ended or revolving payday loans; any bank loan that is secured by funds on deposit, such as overdraft loans; and any retail sales credit loan or other similar rent-to-own transaction, including those where the loan claims to be “secured” by personal property that bears, in actuality, no relationship to the amount of the credit advanced.

          The letter sent today by Attorneys General noted that although existing regulations have curbed abusive practices in the narrow categories they cover, more must be done to adequately protect service members. They encouraged the DOD to collaborate with state attorneys general to create more robust service member protections under the MLA.

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