The bipartisan Veterans and Consumers Fair Credit Act extends the Military Lending Act’s 36% interest rate cap on consumer loans to all Americans, especially Veterans and Gold Star Families
While the Military Lending Act (MLA) currently caps interest rates on loans to active duty service members and their families, Veterans and Gold Star Families are not protected. These members of the military community are especially susceptible to the financial and mental health problems associated with predatory payday loans. Predatory lenders target Veterans and their families, using specialized marketing to appeal to members of the military. The protections that applied to Veterans when they were active duty no longer apply, leaving them particularly exposed to financial exploitation.
Polling data and every ballot referendum held on the subject show that super-majorities of Republican, Democratic, and Independent voters alike support reestablishing traditional interest rate limits. For example, in 2016, 75% of South Dakotans voted to cap rates at 36%.
The Veterans and Consumers Fair Credit Act would eliminate high-cost, predatory payday loans, auto- title loans, and similar forms of toxic credit across America by:
• Reestablishing a simple, common sense limit on predatory lending. The bill would extend the Department of Defense’s 36% interest rate cap to all Americans. This would simply reestablish usury laws that were in force in virtually every state throughout most of the twentieth century.
• Preventing hidden fees and loopholes. The 36% rate cap is based on the Pentagon’s successful rules that include all additional fees or add-ons. A federal law is necessary to stop evasions and protect all Americans.
• Preserving options to address budgetary shortfalls. The Department of Defense’s approach is time-tested and proven. Active duty service members are still able to make ends meet including through non-credit means, such as payment plans with utilities, and with credit from banks, credit unions, finance companies, fintech companies, and retailers.
• Maintaining low industry compliance costs from compromise rules already in effect. Compliance costs for industry will be low because creditors should already know how to comply for active duty military and their families.
• Upholding stronger state protections. States like Arkansas, South Dakota, North Carolina, Colorado, New Hampshire, New York, and Montana already have strong interest rate caps. Existing laws will not be impacted because the bill does not preempt any provision of State law that provides greater protections to consumers.
Resources for Advocacy
For a full list of co-sponsors on the bill, click here