The Senate Banking, Housing, and Urban Affairs Committee will meet tomorrow to discuss predatory lending to military personnel.

The recent Department of Defense report on predatory lending practices that target military families boldly calls on Congress to take action to protect the men and women of the United States Armed Forces from exploitation. Congress must heed this call.

The Defense Department report finds that predatory payday lenders, car title lenders, rent-to-own stores, and other opportunistic debt merchants systematically target military families. These lenders routinely charge annual percentage rates on these loans well in excess of 100% (and as high as 1,000%), despite the fact that Service members’ steady stream of income makes them very low credit risks.

While the report outlines the Department’s own efforts to combat abusive practices through education and credit counseling for Service members, it also acknowledges that education is only part of the solution. The report states unequivocally that our men and women in uniform can only be adequately protected by strong legislative action.

Many of the Defense Department’s recommendations and findings echo the calls legislators and Service member advocates have been making for years. The Center for American Progress’ recent day-long conference on household debt featured a panel discussion on the impact of predatory payday lending on military families. At the panel, Lt. General John Hopper, Jr. (ret.), the CEO of the Air Force Aid Society, described in detail the real effects of predatory lending on military readiness and Service member morale (watch video of the 90 minute discussion here).
The Department has called on Congress to institute a 36% APR ceiling on loans to military personnel and to prohibit the use of checks and car titles as collateral. They also recommend that Congress ban hidden provisions in contracts that cause Service members to unwittingly waive rights to legal recourse for abuses.

The Senate recently passed the Talent-Nelson Amendment to institute some of these recommendations, but the provision as yet to become law. As Lawrence Korb and Jenna Churchman pointed out in a recent CAP column on the Talent-Nelson Amendment, Service members aren’t the only Americans susceptible to these unscrupulous practices.

As Congress debates the issue, our leaders should keep in mind that millions of civilians are also drowning in debt. Congress should take this opportunity to grant relief to all of the millions of working Americans who are being increasingly squeezed by manipulative lenders.

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