Payday loans illegal for military members, families

  • Published
  • By Master Sgt. DAVID ROBIN
  • 56th Aircraft Maintenance Squadron
The Fiscal 2007 Military Authorization Act made it illegal for creditors to grant payday loans and car title loans to military members due to abuses existing in the industry.
In the past, some military members have paid up to 800 percent interest at payday loan establishments. 

The change also prohibits charging more than 36 percent interest to military borrowers on other types of loans. Also, fees, service charges, renewal charges, credit insurance premiums and other products sold with the loan must be included when calculating the interest rate. 

The law also specifies that lenders are not allowed to accept a check from the borrower when lending money to military members or their families, or use any other means of access to a financial account as security for the loans. 

Lenders who violate the provisions of the law are subject to a fine and up to one year in prison. The law prohibits: 

· Requiring military members to set up an allotment as a condition of receiving a loan 

· Requiring the use of a vehicle title as security for loans made to servicemembers or military family members 

· Using a check or any other access to a member's financial account as security for a loan 

· Lenders from renewing, repaying, refinancing, rolling over, or consolidating consumer credit using the proceeds of other credit granted by the same lender to the military member 

· Requiring military members to waive their rights under the Servicemembers' Civil Relief Act or any other federal law 

· Denying the opportunity for military members to pay the loan off early and adding penalties for early payments 

· Any unreasonable clauses in the contract designed to make it difficult for military members to take a creditor to court 

· States from allowing creditors to violate state consumer loan protection laws for military members who are nonresidents 

Don't be the next victim of this type of place. If you are having financial difficulties, contact your supervisor and first sergeant for assistance before the situation gets out of hand. 

Luke has resources such as the Airman and Family Readiness Center that can assist with establishing a budget and provide needed financial counseling.