|
 Joined by 12 other attorneys general,
Madigan submitted the letter to Hagel in response to proposed new
rules under the Military Lending Act. Congress passed the act in
2007, establishing a 36 percent cap on interest and fees on certain
consumer credit transactions with service members. However, the U.S.
Department of Defense's regulations currently limit the protections
to three narrow definitions of consumer credit:
-
Payday loans (only
covering loans of up to $2,000, for a term of 91 days or less)
-
Vehicle title
loans (only covering loans for a term of 181 days or less)
-
Tax refund anticipation loans
The limited lending products covered by the Military Lending Act
have allowed predatory lenders to structure their high-cost loans in
ways that evade the regulations. For instance, lenders offer payday
loans starting at $2,001 or require a minimum repayment period of 92
days, allowing them to avoid the 36 percent interest rate cap.
"Service members are unfortunately prime targets for predatory
lenders," Madigan said. "The Department of Defense must close the
loopholes in the law because those who serve our country don't
deserve to be defrauded by predatory lenders."
[to top of second column] |
Madigan and the other attorneys general stressed that the
protections in the Military Lending Act 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.
Attorneys general from the following states joined Madigan in the
letter to Hagel: California, Delaware, Florida, Indiana, Kentucky,
Montana, North Carolina, Nevada, New York, Oregon, Tennessee and
Washington.
[Text from file received from the office
of
Illinois Attorney General Lisa
Madigan]
 |
