Congresswoman Duckworth Calls for DOD to Protect our Men and Women in Uniform from Predatory Lenders

Press Release

The Honorable Charles Timothy Hagel

Secretary of Defense

U.S. Department of Defense

1000 Defense Pentagon

Washington, DC 20301-3010

Dear Mr. Secretary:

We are writing to express our support for the recent Department of Defense proposed rule to protect service members from payday lenders, auto title lenders and other abusive lenders. Last year 54 Members of Congress wrote to you asking that you close loopholes in regulation that allowed predatory lending practices to continue harming our military members and their families. We appreciate your attention to our concerns and commend you for taking action to address them.

When service members take on high-cost debt with abusive terms, they are forced to make difficult choices between paying off a loan with rates averaging as high as 392%, forgoing other necessities, such as utilities or grocery bills, or taking out additional loans. This accumulation of debt is factored into eligibility for security clearance and advancement, putting their jobs at risk.

To address these concerns, Congress adopted, and the Department of Defense implemented, the Military Lending Act in 2007. The act was designed to put in place strong rules for lenders that do business with members of the military, including a 36 percent cap on interest and fees. The MLA also prohibits other harmful practices such as securing loans with vehicle titles, post-dated checks or direct access to borrowers' bank accounts.

However, current protections apply to only three narrowly defined types of products: closed-end payday loans of $2,000 or less and repayable in 91 days or less; closed-end vehicle title loans repayable in 181 days or less; and tax refund loans. Unfortunately, lenders have been quick to exploit loopholes in these narrow definitions. The Department of Defense's recent report found that 11 percent of enlisted service members took out loans with interest rates over 36 percent over the past year as a result of the MLA loopholes.

We strongly urge the Department of Defense to adopt the proposed rule to expand these narrow definitions of consumer credit and ensure that the Military Lending Act protects service members from unsustainable and abusive credit by:

· Extending Military Lending Act protections, including the 36 percent interest and fee cap and other protections, to all forms of credit targeting members of the military;

· Protecting service members from abusive open-end credit products while ensuring access to credit cards with reasonable rates and fees;

· Ensuring that military relief societies, which provided more than $140 million in low-cost emergency loans in 2012, can continue to lend.

The proposed rule provides the inclusive definition of consumer credit necessary to ensure that all service members are covered by the consumer protections envisioned by Congress in 2007 and will help preserve our force's readiness.

Thank you for your time and consideration of this important matter. We look forward to receiving your response.

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